A (Congressionally Mandated) Faster Short Sale Decision on the Horizon?

Uncertainty is the enemy of the market; many buyers refuse to look at or consider short sales because short sales can take so long. Some sellers go to foreclosure rather than short sell – because the foreclosure process can be more expedient.

Maybe Congress can do a good thing with HR 6133, a bipartisan bill that would force loan servicers to respond to short sale requests within 45 days.

I’m also thinking there may be an un-closeable loophole:

all information required by the servicer

Lenders’ requirements can be nebulous.

For context, in the Charlottesville MSA – Charlottesville, Albemarle, Fluvanna, Greene and Nelson, right now, there are 2513 active residential listings. 72 are marked as Short Sales. I’d bet that this number is realistically at least five times 72.

For Congress, a Short Sale is:

‘(4) SHORT SALE- The term ‘short sale’ means the sale of the dwelling or residential real property that is subject to the mortgage, deed or trust, or other security interest that secures a residential mortgage loan that–
‘(A) will result in proceeds in an amount that is less than the remaining amount due under the mortgage loan; and
‘(B) requires authorization by the securitization vehicle or other investment vehicle or holder of the mortgage loan, or the servicer acting on behalf of such a vehicle or holder.’.

The last line makes me wonder – how long will it take to pass this bill? Should homeowners contemplating short sales delay submitting for a short sale in anticipation of this bill passing?

(b) Applicability- The amendment made by subsection (a) of this section shall apply to any written request for a short sale made after the date of the enactment of this Act.

BUT:

As we’ve seen with electronic signatures, just because something legally can and should happen doesn’t mean that it will or does happen. The trickle-down of enacting and enforcing can take a looooong time.

(archived: 2011)

And, as Bryan Hancock says on the Bigger Pockets forum:

…I definitely don’t see the banks rolling over and hiring tons of people to live up to the law. I see them finding language in the law that allows them to “respond” or make a decision without making a decision.

People are expensive and hiring tons of them all at once will still necessitate training and some ramp-up time.

Thanks to the NAR for supporting this bill (archived: 2011) – it might be good for Realtors and consumers.

Here are a few of the listed, marked short sales in the Charlottesville area (this list automatically generated):