So, H.R. 1498 has been introduced: "Prompt Decision for Qualification of Short Sale Act of 2011". Kudos to Congressman Rooney of Florida for drafting this bill that proposes an amendment to Chapter 2 of the Truth in Lending Act. Read the text of the Bill here.
Essentially, the flow of the legislation says this...
But here is the real reason to wonder if this legislation has teeth... HAFA (the Government Short Sale program) requirements are already in place and seems to have even more stringent policies, requiring the servicer to provide the short sale applicant an answer in only 30 days. Even though H.R. 1498 has consequences that "bind" the servicer with an automatic approval if they can't get an answer in 45 days, HAFA should be sufficient in standardizing the process and getting banks to conform without these changes. Well, at least that seems logical, right?
Remember, one of the basic elements in negotiating a deal is the "value creation". Can a bank approve a short sale in less than 45 days? 30 days? 15? I tell you, banks can approve a short sale in 15 minutes, if it is the right deal for them to make. The effort to standardize the short sale process and add teeth to try and get banks to conform is a good effort. However, at the end of the day banks don't need time, they need to know that this is the best deal they are going to get. It is not a time problem. It is not a word problem. It is a math problem.
In my opinion, the weight that needs to be brought forth to give incentive to the bank is simply this... if the net gain from short selling a home (before foreclosure) is greater than the net gain from selling after foreclosure, banks should be required to approve the short sale. Am I being over-simplistic? Perhaps. But I'm not sure the current proposals will yield the results that legislators are thinking.
Essentially, the flow of the legislation says this...
- If mortgagor submits to the servicer a written request for a short sale...
- and all information required by the servicer is included...
- and the mortgagor does not receive from the servicer before a 45-day period...
- a written notification of whether such a request has been approved...
- or, has been approved subject to specified changes...
- or, that additional information is required...
- such request shall be considered to have been approved by the servicer.
But here is the real reason to wonder if this legislation has teeth... HAFA (the Government Short Sale program) requirements are already in place and seems to have even more stringent policies, requiring the servicer to provide the short sale applicant an answer in only 30 days. Even though H.R. 1498 has consequences that "bind" the servicer with an automatic approval if they can't get an answer in 45 days, HAFA should be sufficient in standardizing the process and getting banks to conform without these changes. Well, at least that seems logical, right?
Remember, one of the basic elements in negotiating a deal is the "value creation". Can a bank approve a short sale in less than 45 days? 30 days? 15? I tell you, banks can approve a short sale in 15 minutes, if it is the right deal for them to make. The effort to standardize the short sale process and add teeth to try and get banks to conform is a good effort. However, at the end of the day banks don't need time, they need to know that this is the best deal they are going to get. It is not a time problem. It is not a word problem. It is a math problem.
In my opinion, the weight that needs to be brought forth to give incentive to the bank is simply this... if the net gain from short selling a home (before foreclosure) is greater than the net gain from selling after foreclosure, banks should be required to approve the short sale. Am I being over-simplistic? Perhaps. But I'm not sure the current proposals will yield the results that legislators are thinking.
1 comment:
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