New Rules Designed to Accellerate Short Sale Process
Thursday, January 14, 2010
By Charlie Hounchell, Esquire
Good news for all of those financially stressed homeowners out there who are attempting to sell their homes through a short sale. New federal guidelines will require lenders to respond to short sale purchase offers within ten (10) days after the offer has been made. The rules from the U.S. Treasury, will allow financial incentives for both sellers and lenders.
The Feds have definitely taken a step forward in an effort to expedite the short sale process. Typically, buyers attempting to purchase short sale properties will have to wait for many months before receiving any response from the lender. Longer than normal delays often result in frustrating the buyer so much that they will actually walk away from the deal.
We currently have a number of short sale clients awaiting a response from their lender to contract offers. It is not unusual for these clients to be waiting as long as four (4), five (5) and six (6) months to hear whether the bank will accept the offered terms. As a result, these properties stay on the market and extend the decline in our housing market.
Only banks that owe the federal government TARP bailout funds must comply with the new rules which will take effect sometime between now and April 2010.
A short sale occurs when the homeowner sells his home while owing more to the bank than the property is currently worth in today’s real estate market. The bank must approve of the contract terms and, depending on the negotiation with a specific lender, the homeowner may or may not face a judgment lien on the deficiency amount.
The new Treasury rules allow sellers to receive a $1,500 moving allowance with no obligation to repay any of the deficiency amounts, i.e. the difference between what the property sells for and what is actually owed on the loan.
Lenders will also receive $1,000 to cover administrative costs and investors owning the mortgages will be given a maximum $1,000 for allowing as much as $3,000 of a short sale's proceeds to be distributed to subordinate lenders.
Currently, eighty three (83) loan servicers are participating in the Making Home Affordable loan-modification program, including Bank of America and JPMorgan Chase. All participating lenders are required to follow the guidelines for all borrowers who have requested short sales or who did not complete loan modifications.
Loans guaranteed by Fannie Mae and Freddie Mac, do not specifically fall under these new federal guidelines. The two government run mortgage companies are developing their own rules to apply to short sales.
Lenders must implement the Treasury plan by no later than April 1st and the Treasury Department has warned that non-compliance will result in substantial penalties.
These new short sale rules represent a welcome change to a currently chaotic and disorganized system. If the participating lenders actually cooperate, buyers and sellers will benefit and we will all enjoy a turn for the better in our housing market.
Please be advised that this article does not constitute legal advice nor does it provide any basis to form an attorney-client relationship. Nothing in this article should be copied without the express permission of the author.
Mr. Hounchell has a law degree from The University of Florida College of Law and he is a principal in The Law Offices Charles A. Hounchell, P.A., in Tampa, Florida. Mr. Hounchell earned his undergraduate degree from The George Washington University in Washington D.C. and he obtained his MBA in International Management from the American Graduate School of International Management (“Thunderbird”) in Glendale, Arizona.
Mr. Hounchell is a licensed title insurance agent and a real estate agent with Smith and Associates, Inc.www.smithandassociates.com; www.livecasanova.com. He has lived in many different countries, including Spain, Brazil, Argentina, Mexico and Germany and he speaks Spanish and Portuguese. A significant portion of Mr. Hounchell’s law practice is concentrated on Real Estate Law. He can be reached at 813-251-2701 or firstname.lastname@example.org
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