Legislation Introduced to Speed Lender Response to Short Sales
By: Carrie Bay
Two lawmakers, one Republican and one Democrat, have joined forces to push federal legislation through that would facilitate wider use and shorter transaction timelines for a foreclosure alternative that some say could be a lifeline for millions of underwater homeowners while drastically reducing the number of empty, repossessed homes lining U.S. neighborhoods – the short sale.
The bill, introduced by Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey), would impose a deadline of 45 days on lenders to give an approval, disapproval, or status of a decision on an offer for a short sale.
According to a statement from the congressmen, consumers have had difficulty executing short sales as lenders have taken months to decide whether to accept proposed short sale prices, which can often derail the sale altogether and send the homeowner into foreclosure.
Rooney and Andrews say their legislation, the Prompt Decision for Qualification for Short Sale Act of 2011, will bring the processing time for short sale price approvals in
line with the home-buying and home-selling consumer’s expectations – at most 45 days after submitting the request for short sale approval.
A similar bill – in fact, by the same name – was introduced last September but never came up for debate before a House committee before the legislative session ended.
The National Association of Realtors (NAR) is throwing its support behind the new bill. The trade group has been actively pushing the lending industry to improve the process for approving short sales, which represent about 13 percent of recent home sales according to NAR data.
“Realtors want to help more homeowners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time,” said Ron Phipps, president of NAR and broker-president of Phipps Realty in Warwick, Rhode Island.
Phipps says a short sale not only minimizes the negative impact on the borrower, but in most cases costs the lender less than a foreclosure. He praised Reps. Rooney and Andrews for their efforts on a bill that he says could soon bring relief to distressed homeowners who hope to avoid foreclosure.
Some market participants, though, aren’t so optimistic, arguing that the government has a host of requirements in place for the banks when it comes to certain housing and mortgage issues that aren’t enforced.
The Prompt Decision for Qualification for Short Sale Act of 2011 has not yet been referred to a committee.
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