Short Sale Act of 2011
On April 12th, the Short Sale Act of 2011 was introduced to the legislature by Congressmen Robert Andrews (N.J.) and Tom Rooney (Fla.) The bill proposes an expedited time frame of 45 days for lenders to respond to borrowers request to enter into real estate short sales.
The Short Sale Act of 2011 is applauded by homeowners, buyers, realtors, and investors, but most don't have high hopes that major policy changes will occur. Reason being the bill's verbiage states the 45-day deadline commences once "all information required by the servicer" is provided.
This type of language leaves the door wide open for banks to languish with granting short sale approval. As a real estate investor who has purchased short sale homes, I can attest the process is cumbersome. The banks misplaced documents multiple times with every transaction. It won't be difficult for loss mitigators to claim they didn't receive a document and prolong the process.
Part of the problem stems from the fact banks can't keep up with the abundance of short sale requests. Foreclosures continue to escalate, even with government-sponsored programs such as Obama's Making Home Affordable.
MHA is partially responsible for the record number of short sale requests. Thousands of homeowners have turned to this program for mortgage relief. Unfortunately, less than 10-percent of the anticipated 3 to 4 million homeowners this program was supposed to help have entered into permanent loan modification. Fewer have obtained short sale approval.
On the bright side, if the Short Sale Act of 2011 passes, it could help homeowners avoid foreclosure and allow buyers to take quick possession. Many investors, including myself, have walked away from short sale deals because of the long, drawn-out process.
From an investor's standpoint, short sale homes cut into cash flow when the deal can't be completed in timely fashion. A lot of times the bargain price is worth the wait, but when it takes 4 to 6 months to close and another month or two for renovations, it better be a smoking hot deal.
Realtors could breathe a little easier if the Short Sale Act passes and actually creates positive change. The National Association of Realtors reports about 13-percent of residential home sales are comprised of short sale properties.
Many of the realtors I know feel that number could easily become 25-percent or more if the approval process was expedited. A 12-percent increase in sales would be a welcome boost to the market and could restore confidence amongst buyers.
The Short Sale Act of 2011was previously presented 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, but yet to be reported by Committee.
We can only hope the Short Sale Act of 2011 takes higher regard over borrowers than banks and closes loopholes that could prevent major change. The real estate market has carried a heavy burden for a long time and it's time to see radical change for the better.
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