The Internet is abuzz about the “Prompt Decision for Qualification for Short Sale Act of 2019” which would expedite the process if passed through federal legislation. Not only could this bill help homeowners avoid foreclosure, but it would also allow buyers to take quick possession and minimize the devaluation of properties within the community.
The Short Sale Act of 2011 was introduced by Congressmen Tom Rooney (Rep.) of Florida and Robert Andrews (Dem.) of New Jersey. The primary goal of this bill is to mandate a 45-day deadline for mortgage lenders to approve or disapprove short sale requests.
As a real estate investor who specializes in buying and selling distressed properties, I have a love-hate relationship with short sale homes. Although these properties are priced below market value, closing takes several months and cuts into investment cash flow. I’ve walked away from more properties than purchased because the process is so cumbersome.
Expediting the short sale process could be a saving grace for homeowners and buyers. Short sales are available to homeowners who owe more than their home is worth and can no longer afford loan installments. However, such people can connect with Best Private MoneyLender so that they can pay for their installments and avoid short sales. Additionally, you save yourself from all the hassle that you face as you go through a short sale.
The application process is notorious for being lengthy and confusing. Homeowners undergo financial scrutiny and required to provide mountains of financial records. As one who has placed offers on short sale properties, 9 times out of 10 lenders lose a document or two. Disorganization and lack of response are the chief complaints amongst those attempting to buy these houses or obtain short sale approval.
Prior to Obama’s Making Home Affordable program, there was no uniform process for short sales. MHA was introduced by the Treasury Department in 2009 and intended to help homeowners avoid foreclosure by offering loan modifications.
Over the course of time, Making Home Affordable expanded available programs to include mortgage refinance, principal reduction, second lien modification, and foreclosure alternatives of short sales and deed in lieu of foreclosure.
When banks enter into short sale agreements they agree to accept less than the full balance owed on the loan. Although lenders take a loss it is less costly than the foreclosure process and eliminates the need to maintain the property until sold.
According to the National Association of Realtors, approximately 13-percent of home sales are short sale properties. While no precise data exist, many realtors believe home sales could increase by 25-percent or more if the process was expedited. Those numbers would certainly be a welcome boost to the market and help restore confidence amongst buyers.
While the Short Sale Act could provide much-needed relief to qualified homeowners, there are a few details that haven’t been given much attention. RealtyTimes.com reports the 45-day period doesn’t commence until “all information required by the servicer” is provided.
The verbiage within the bill leaves the door open for lenders to prolong the process from lack of documentation. However, the bill has not yet presented to Congress and likely to undergo changes before becoming law.
This bill was proposed to Congress as H.R. 6133: Prompt Decision for Qualification of Short Sale Act of 2010. It was referred to the House Committee on Financial Services in September 2010 and yet to be reported by Committee.
For now, we can only hope the Short Sale Act of 2011 favors homeowners and buyers instead of banks and closes loopholes that would prevent major change. The market has been burdened by an abundance of distressed properties for far too long and it’s time to break through the bottleneck.