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Proposed Law Would Speed Up Short Sales
Struggling homeowners frustrated with slow response from their lender would benefit from a proposed law that would speed up short sales. Congresswoman Susan Davis (D-San Diego) submitted bill H. R. 3164, the Short Sale Transparency Act last month.
What Is A Short Sale? The term "short sale" means, a buyer purchases your property that will result in proceeds in an amount that is less than the remaining amount due on the mortgage loan on the property. For example, you sell a property for $100,000 but you owe the bank $150,000. A short sale is a slightly better alternative for struggling homeowners than a foreclosure.
Benefits Of Short Sales Short sales benefit mortgage companies, homeowners and neighborhoods. Statistics show that short sales can result in higher prices than foreclosures. In other words, there is less of a loss for the lender. Short sales are usually less damaging to local neighborhoods, in part because homes are not left vacant and exposed to vandalism and deterioration.
Short Sales Take Too Long Despite the potential for lower loss for the lender, short sale transactions are not easy to complete. They can take four to six months. A lot of that time is wasted because the mortgage company takes forever to decision whether they will accept the short sale. In addition, if the short sale is rejected by the lender, there is little feedback offered by the lender to the homeowner to better understand why a short sale offer was rejected.
Communication Breakdown The communication is poor for a couple reasons. First, the short sale departments for lenders are understaffed. Even though several banks are offering thousands of dollars to delinquent homeowners, sale teamz that were 250 people strong before the housing crisis and are today staffed up to 3,000 people, they are still short staffed and overloaded with files flagged for short sale. Second, although banks have increased staff to handle the huge volume of short sales, these new hires take time to train and get used to their new job.
Proposed Law Would Speed Up Short Sales If enacted the Short Sale Transparency Act would require Fannie Mae and Freddie Mac (who own a huge number of mortgages in America) to disclose the minimum asking price that they are willing to accept for a short sale if the first offer is rejected. "People deserve a real chance to avoid foreclosure. It is unfair to expect someone to complete a short sale instead of abandoning their home to foreclosure, if the banks don't meet them half way," said Congresswoman Davis. "So many homeowners are willing, even eager, to work with banks to get out from under the mortgage and protect their credit rating. But far too often, they find themselves in a guessing game as to what dollar amount will complete the sale."
More Complete Short Sales Helps Economy Short sales are difficult to complete because homeowners are driving blind when submitting offers to their bank. As a result, loan servicers can repeatedly deny short sale offers without giving homeowners feedback on the price the bank is asking. This frustrating and time consuming tug of war can only end in foreclosure unless a short sale agreement is reached. In some cases, a short sale offer could be as little as $2,500 less than what the bank would accept. If this fact was disclosed to the homeowner they might figure a way to come up with the rest of the money to get the short sale done. Maybe they could get the new buyer to increase their offer by that amount or the seller could kick in the difference themselves or some mix of both.
Author Resource:-
Nathan Randall, editor, Daily Dollar Newsletter provides free daily advice on money matters plus coupons and discount codes. FYI...you can now access the Daily Dollar Newsletter via iTunes podcast, YouTube video, and on Facebook and Twitter too.
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