The California State Assembly has approved a bill that would prevent a lender or servicer from proceeding with a foreclosure on a home after approving a short sale in writing.
Assembly Bill 1745, sponsored by Norma Torres, (D-Pomona), prevents lenders and servicers that have agreed to a short sale from foreclosing on a home. Lenders would have to give the borrower three days’ notice before withdrawing the short sale approval and explain why it was revoked.
“This is a straightforward bill, the bank or servicer cannot record a notice of sale on a home while the escrow is waiting to close on a short sale,” said Torres on her website. “We want to help homeowners who are trying to avoid a foreclosure through a short sale by encouraging these bank departments to start communicating with each other.
Foreclosures and short sales are usually handled by two different departments within banks. Unfortunately, these two departments often do not communicate with each other, which can frequently result in a homeowner being foreclosed upon, despite having previously negotiated a short sale with the same bank.
This process is known as “dual tracking,” when a lender simultaneously agrees to a short sale while proceeding with a foreclosure sale too. AB 1745 will put an end to dual tracking and could reduce REO inventory.
AB 1745, which is supported by the California Association of Realtors, was approved unanimously 67-0. The bill is headed to the Senate for further consideration.
AB 1745 is an important step to ensure fairness in the foreclosure/short sale process. The bill is also a good law for both homeowners and realtors.
Readers what do you think? Is Assembly Bill 1745 a good law?
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