H.R. 6133 Archives - Real Estate News and Commentary

by Dan Krell ©2012
DanKrell.com

A March 2012 Housing Wire piece (housingwire.com) indicated that CoreLogic recently reported that there were 11.1 million home owners who owed more on their mortgages than what their home is worth, which roughly translates to 22.8% of all mortgages being underwater. At one time, most home sellers applying for a short sale were experiencing hardships and foreclosure. However, as the housing market continues to recover- an increasing number of short sale listings are from sellers who are current on their mortgage and are not experiencing hardships.

For home owners who are experiencing financial difficulty, there are a number of options available to keep your home; however often a last resort- the short sale is one alternative to losing your home to foreclosure. However, home owners who need to sell their homes (because of a job transfer, divorce, or other reason), but are not otherwise experiencing a financial difficulty nor hardship, are also turning to the short sale process because of depressed home sale prices.

Although short sale horror stories still circulate, much has changed and many lenders have attempted to “streamline” their short sale process. Still, this has not prevented Congress from attempting to force lenders to provide speedy short sale decisions. In 2010, H.R. 6133 H.R.: Prompt Decision for Qualification of Short Sale Act of 2010 was introduced to require a 45 day response from lenders, however it “died” in committee. A recent form of this legislation was introduced in 2011 (H.R. 1498: Prompt Decision for Qualification of Short Sale Act of 2011), but GovTrack (govtrack.us) gives the bill an 8% chance of becoming law. Another bill, S. 2120: Prompt Notification of Short Sales Act, was introduced in February; GovTrack gives that a 2% chance of being enacted.

Beware of the circulated “wisdom” regarding short sales, because it is not always reliable or accurate (e.g., hardships and delinquencies). If your home has negative equity (underwater) and you want to sell, consult with an attorney; there are financial and legal issues that may affect you presently and in the future. The short sale process may seem straightforward, but it can get complicated quickly (especially if there are multiple mortgages involved). Many experienced short sale agents work in tandem with attorneys to make the process much smoother than otherwise would be expected.

If you’re an underwater home seller, but have assets and are not experiencing a hardship, your attorney can advise you on the short sale process. The issue pertaining to a successful short sale is not always about the seller’s financial status; but rather, a short sale is more about the amount the lender will accept as payoff for the existing mortgage. Yes, the lender will collect your financial information to use in their short sale determination; but a skilled negotiator may be able to reduce the overall mortgage payoff (even if you have to bring funds to closing).

Finally, an attorney is the only person who can provide you legal advice. Real estate agents advising you to stop making payments on your mortgage or to “fudge” your short sale application could be putting you in a precarious position: your credit can be affected, or your home can go to foreclosure when payments are stopped; providing false or misleading information to your lender is fraud (lenders and law enforcement are working together to stop short sale fraud).

Additional information about short sales:
Short sale is an option
Don’t be pushed into a short sale
House bill proposes 45 day lender response on short sale
Mortgage fraud on the rise

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 30, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

by Dan Krell © 2010

A recently published study by CoreLogic (“The Cost of Short Sales: CoreLogic Research Study”; August 2010) indicated the number of short sales tripled since 2008. The study also indicated that “short sales will continue to be a significant factor for the housing industry.” Additional telling data from CoreLogic’s second quarter Negative Equity Report (2010) indicates that 23% of all properties with a mortgage (approximately 11 million) are in a negative equity position (also referred to as under water or upside down).

For many, this news does not come as a surprise; which is why short sales have become the focus of a new bill introduced last week in the House of Representatives by Rep. Robert Andrews (D-NJ) and Rep. Thomas Rooney (R-FL). The “Prompt Decision for Qualification of Short Sale Act of 2010” was referred to the House Committee on Financial Services on September 15th and, although approximately five pages in length, could potentially impact the housing industry.

Representative Rooney stated, in a September 16th press release regarding the bill, that short sales in his state of Florida are rising, “but lenders haven’t always been able to keep pace”… “By requiring lenders to make decisions on short sales within 45 days, this legislation would speed transactions and help prevent homes from going into foreclosure.”…”This bill would spur growth in the housing market by helping sellers and buyers complete short sales quickly.”

Anyone familiar with a short sale knows that there is uncertainty as to the length of time the seller’s lender will respond to a short sale request; which prompts many buyers and real estate agents to shy away from them. Additionally, some buyers who take a chance on a short sale walk away because the transaction takes too long. These are just a few factors that contribute to failed short sales which add to the foreclosure roll.

The bill, also known as “H.R. 6133: To Require The Lender Or Servicer Of A Home Mortgage, Upon A Request By The Homeowner For A Short Sale, To Make A Prompt Decision Whether To Allow The Sale,” is intended to provide a timeline for the lender to provide a response to a short sale request. The basics of the bill states that the home seller’s lender has 45 days to provide an answer to a short sale request when the seller submits all lender required short sale information and a fully executed sales contract. The lender’s response could be an approval, a conditional approval, or a request for additional information. If the lender fails to respond to the request within 45 days, then the short sale request will be considered to have been approved.

Although the bill puts a necessary spotlight on one weakness of the housing market, the bill obviously falls short in a number of areas. Besides the limitations already specified within the bill, the bill fails to address the complexity of a short sale with multiple lenders as well as the possibility that lenders may “game the system” by issuing requests for additional information or provisional approvals by the 45th day then take several additional months to make a final decision.

Unfortunately, many bills do not make it out of Committee and the odds of passing this particular bill are slim. Ironically, we won’t know the outcome for several or more months.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 20, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Category: H.R. 6133

Non-hardship short sales on the rise

House Bill Proposes Prompt Short Sale Decisions: H.R. 6133 requires 45 day response