Short sales. These two words strike fear in buyers, agents and title companies. Whenever we receive a contract for a short sale, there is an immediate push to get out the seller HUD-1 to the short sale lender, ASAP!
We get calls from everybody involved to drop everything and get that short sale HUD-1 out for review immediately. We’re told that any delay by us will delay the settlement.
The reality is that after we send out the short sale HUD-1, the short sale lender doesn’t even bother to review it and approve it for months. I’ve had plenty of frantic calls from listing agents insisting that the short sale HUD-1 needs to be sent out by the end of the day, only to not get an approval (and thus a closing) for six months. In some cases, the response has taken even longer.
Apparently Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-NJ) have heard about these issues as well. They recently introduced a bill in the House of Representatives that would require mortgage servicers to respond within 45 days of receiving a short sale request.
As might be expected, the National Association of Realtors immediately backed the bill. The hope is that the bill will assist homeowners who are unable to avoid foreclosure, since the lengthy delays often correspond with the seller’s inability to make timely monthly payments.
Even if the bill is passed, it remains to be seen if it is practical. Often approvals are needed from multiple entities, and obtaining approvals from all the parties in 45 days may be difficult. Also, the bill requires that the servicer must send notification to the borrower within the deadline whether or not the request is approved, changed or if additional information is needed.
So this does leave a servicer the opportunity to ask for additional information, thereby extending the deadline.
Despite this, passage of the bill could be a significant step in improving the short sale process, and saving all of us in the real estate industry some stress when it comes to a short sale closing.