Last Thursday, a new Senate Bill was introduced by Sen. Lisa Murkowski (Republican) of Alaska. Senate Bill 2120 would require lenders to make a prompt decision when a borrower makes a written request for a short sale.
We have found that times for loan servicers to process short sales have improved considerably over the past several years. In many of our cases, once we have a purchase offer in hand and have submitted the necessary financial and legal documents to the servicer, we are now receiving decisions from lenders within just a few weeks.
But we also see cases where lenders or servicers drag these cases on and on. They misplace paperwork, or claim that they have never received the paperwork. And they frequently change negotiators on us in the middle of the case - meaning that we must make contact with someone new mid-transaction, and then wait for that person to get up to speed with the file. In these cases, our case managers often end up spending weeks, or longer, making repeated follow-up phone calls to the lender, simply to make sure that someone over there is paying attention to the case!
What Bill 2120 will do is provide limits on lenders’ response time. It will give lenders up to 75 calendar days, following receipt of a request from the borrower (in writing) to short sale the home that secures the loan. Lenders must, within that time period, either approve, or deny, or approve with specified changes, the short sale request. Lenders may also, within that time period, extend their decision date by up to 21 calendar days - but they may only do this once.
An interesting angle to this Bill is that it outlines the compensation a lender must pay a borrower if they fail to respond within that timeline: lenders must pay the borrower $1000 per violation, plus reasonable attorney’s fees, or “such higher amount as may be appropriate in the case of an established pattern or practice of such failures.” Although a homeowner would have to file a court action in order to receive this compensation, hopefully the simple fact that this law exists would be enough to encourage lenders to meet those timelines.
Another bill, which was introduced nearly a year ago to expedite short sale requests, has made it only as far as the committee level. House Bill 1498 proposed that, if a lender did not respond to a short sale request within 45 days, that short sale would automatically be approved.
On the whole, the length of time for approval of short sales is improving. The majority of our short sales are approved in well under the 75 days that this bill specifies. However, Bill 2120 would help in pushing along those few lenders who do still drag their feet when dealing with short sale requests.
If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/
If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/
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