Proposal to Speed up Home Sales Made

A proposal that would require banks to inform secondary lenders that a short sale is being attempted by homeowners has been made to short sale time frame speed up the process, which homeowners have been complaining about for years.

The proposal, introduced in Congress by House Rep. Jerry McNerney (D-CA) would require second mortgage holders and lenders with lines of credit to respond to requests for short sales within 45 days. The legislation would also impose a deadline for lien holders to respond following a formal offer to purchase property for less than what is owed on the combined loans.

Short sales are held up and often cancelled due to lenders refusing to respond to offers to sell a home at less than what is owed on the property. Under a new law that went into effect June 1, banks holding the principal mortgage have 60 days to respond to short sale requests on mortgages that are federally insured.

Streamlining the short sale process for both primary and secondary lien holders will aid the housing market, increase home values over the long term and produce an increase in short sales.

“Short sale negotiations are much more difficult for borrowers who have multiple servicers involved,” said National Association of Realtors president Moe Veissi. “Ongoing delays continue to severely limit the number of homeowners who are approved for short sales, forcing many homeowners into foreclosure.”

Second mortgage holders often cancel short sale transactions after refusing to reduce the debt owed by the borrower on a property. However, as banks realize that many homeowners have no other assets, and there is little else they can do to recoup losses, there has been an increase in the volume of second lien holders agreeing to short sales.

“While efforts have been made to improve primary lien holders’ response times, issues still abound with second and subsequent lien holders, and this legislation is a step in the right direction,” said Veissi.