Home owners will get faster decisions when they ask their second mortgage lender to approve a short sale if a bill introduced in Congress this week passes. The bill would give second mortgage lenders 45 days to respond to a home owner’s request to sell his home for less than what’s owed on the combined first and second mortgages.
The Fast Help for Homeowners Act, offered by U.S. Rep. Jerry McNerney (D-Calif.), will help distressed home owners avoid foreclosure, says NATIONAL ASSOCIATION OF REALTORS® President Moe Veissi. “Short sale negotiations are much more difficult for borrowers who have multiple servicers involved and ongoing delays continue to severely limit the number of home owners who are approved for short sales, forcing many home owners into foreclosure.”
The bill would set up a short sale process where the first mortgage lender tells the second mortgage (or even third mortgage) lender that the home owner needs a short sale. The lenders would have 45 days to respond to that request.
NAR has been actively pushing the mortgage servicing industry for years to improve the short-sale review and approval process, especially in cases where second mortgages are involved. “Second mortgage lien holders frequently hold up and cancel the short sale transaction while trying to collect the largest possible payout in exchange for releasing the home owner’s lien, even though the secondary lien holder often gets nothing if the home ends up going into foreclosure,” said Veissi.
In some states, short sales involving second mortgages are quite prevalent. A recent survey by the CALIFORNIA ASSOCIATION OF REALTORS® found about half of all properties sold as short sales in California had second mortgages and that getting a decision on the short sale from the second mortgage lender was often derailing those deals.