Real estate brokers who have long complained about the time it takes to complete a short sale now have two U.S. congressmen in their corner who are sponsoring a bill that would require lenders to respond to consumer short sale requests within 45 days.
Real estate brokers — and homeowners – have long complained about the length of time it takes to get a short sale done.
Lenders have been pushing more short sales as the industry recognizes them as a viable alternative to foreclosure. Short sales in the U.S. have tripled since 2008, according to data analyzer CoreLogic.
At the government-sponsored enterprises (GSEs), short sale volume in the second quarter was up more than 150% from volume in 2Q09, according to the Federal Housing Finance Agency’s “Foreclosure Prevention & Refinance Report.”
This summer, Bank of America began testing a new short sale program that targets 2,000 pre-screened homeowners to short sell their homes. The participants are borrowers who have been considered for a modification under the Home Affordable Modification Program (HAMP) and a short sale under the Home Affordable Foreclosure Alternatives (HAFA) program, but have fallen out of either program or failed to qualify.
The National Association of Realtors (NAR) is supporting the bill, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010.” It was filed Sept. 15 by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill was referred to the House Committee on Financial Services on Wednesday.
Immediate comment was not available to the bill from the Mortgage Bankers Association.
“The short sale, which requires lender approval, is an important instrument for homeowners who owe more than their home is worth,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said in a news release. “While the lending community has worked to improve the size and training of their short sales staffs, they still have a long way to go on improving response times.”
In the second quarter, Nevada, California, Florida and Arizona had significant shares of all properties on the market are potential short sales: 32%, 28%, 27% and 24%, respectively, according to NAR data.
“Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time,” she said. “Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price,” Golder said.
REO Insider is currently running a survey asking readers about the longest time that it has taken to complete a short sale. So far, 81% of respondents have said it takes more than 91 days, with 44% of those saying it takes 91-180 days.
Write to Kerry Curry.