Despite the name, short sales are anything but short. The home sales transaction is marked by a borrower and a lender working together to sell the home for less than the total amount due on a home loan as a way for both parties to avoid the tiresome process of foreclosure. The sales transaction is called 'short' and that term "...reflects that the amount of the home price is less than the actual amount due to the lender," (MortgageMarvel.com). A bipartisan bill was just introduced to the House of Representatives to dramatically speed up the process.
Presently, short sales are an extremely popular option for property owners trying to avoid defaulting on their mortgages. Once the bank has been notified that the short sale strategy is being implemented, the process begins like any other sales transaction. The house is staged, photographed and listed on the local multiple listings service. Interested parties check out the properties and potential home buyers enter their bid for the purchase. It is at this point the process takes a long and winding turn as the current home owner must submit the offer to the primary title holder (the mortgage issuer). From that point on it is a waiting game that can take up to a full year to process and purchase approval is not guaranteed.
About the H. R. 1498 Bill
The H. R. 1498 Bill, called the "Prompt Decision for Qualification of Short Sale Act of 2011," is a result of bipartisan efforts Representative Tom Rooney (Republican, Florida) and Representative Robert Andrews (Democrat, New Jersey). The proposal would require mortgage servicers to respond within 45 days of receiving a short sale request. Currently there are no federal laws surrounding short sale transactions.
If approved, the new law would require the home mortgage servicer to issue communication regarding "...whether or not the request is approved, changed or if additional information is needed," (HousingWire.com). The National Association of Realtors immediately issued their support for the legislation as they believe it will help financially struggling home owners avoid foreclosure and would prevent a potential home buyer from walking away from the sale because of the hassle associated with short sale transactions.
The bill focuses its efforts in regards to the private mortgage industry. Politicians have introduced other measures to address the 90 percent of home loans that originate through government agencies including Fannie Mae and Freddie Mac.
Treasury Department Backed Short Sale Changes
In April 2010, the Treasury Department introduced the revamped Home Affordable Foreclosure Alternatives program (HAFA) that focuses on short sales as an alternative to home loan default. The department took steps to streamline the short sale process in December of that year. Based on their recommendations, servicers upped their outreach efforts and a step requiring verifying income for sellers (except in situations where are borrower is 60 days past due on the mortgages) was eliminated from the process.
That process allowed more than 91 percent of previously ineligible borrows (due to income) to be able to participate in HAFA short sales. As a result, through February, mortgage servicers started 10,488 agreements with homeowners that were submitted by February 2011 and 4,488 short sales were successfully processed under the program.
The nation's larges loan provider Fannie Mae, has also worked on trimming the fat from short sale transactions. John Will, Fannie Mae's director of component servicing has stated, "We are trying to cut the timeline in half." Will noted how important it is to accept and process first offers quickly as with the second and third buying attempt, bid amounts drop.
Short Sales Growing In Popularity
The changes are a necessary step in aiding in a full rebound of the housing market as statistics from Fannie Mae and Freddie Mac showed short sale activity increased 167 percent compared to the same time period in 2009 (Federal Housing Finance Agency). Additionally the Mortgage Bankers Association has predicted that short sale activity will increase by 50 percent in the near future.
One way potential home buyers can speed up there end associated with a short sale is by making a bid backed by a pre-approval of a home mortgage. Mortgage seekers looking to prove loan pre-approval can count on Mortgage Marvel, the industry's premier mortgage rates origination site, to assist in the task. The process is as simple as conducting a search on the "better rate finder" and completing an online application. Once those steps are complete, mortgage seekers will get their pre-approval status in about 20 minutes.
