Whether or not he is doing it to score some political points with his constituents or with other lawmakers on Capitol Hill, Congressman Jerry McNerney, D-Stockton, at least has a plan to quicken the short sale process.
Unveiled July 19, the proposed bill addresses what distressed sellers and real estate professionals see as the major stumbling block to buyers looking at short sales to begin with — the often long, drawn out process of completing a short sale… if even completed at all.
McNerney has plenty of motivation to sponsor such a bill. He represents a place that RealtyTrac has crowned the metro area with the highest foreclosure rate in the nation many times over since the beginning of the national housing crisis.
Just today, RealtyTrac announced in its Midyear 2012 Metropolitan Foreclosure Market Report that Stockton topped the heap for the first half of 2012 in terms of foreclosure rate among the 212 metro areas with populations exceeding 200,000. In all, 2.66 percent of Stockton’s housing units had a foreclosure filing during the six month period (that’s one in every 38 housing units).
As written, McNerney’s bill, titled the Fast Help For Homeowners Act(H.R. 6153) would take care of what can seem like a never-ending process that turns off buyers and makes selling an underwater property nearly impossible for Realtors, particularly if the property has a second mortgage lien on it. Up to now second mortgage lienholders have been seen as an impairment to the short sale process.
The Act addresses this problem directly by requiring that second mortgage lenders review and make a decision on a short sale agreement within 45 days. If no decision is reached within that time frame, then the short sale will be automatically approved on the 46th day.
Frankly, shepherding a short sale to completion is tough enough as is, with lenders requiring home sellers to complete their information package — including a hardship letter — and then waiting for a seemingly endless amount of time until the lender’s staff gets around to reviewing the package, which many times is rejected. And that’s just the senior lender without the added layer of dealing with a junior lienholder, who may lose everything anyway if the property goes to foreclosure and ends up as an REO.
With short sales in much greater supply in most markets around the country compared to bank-owned homes (REOs), shortening the process makes sense so that financially strapped homeowners can get out from under a bad situation and get on with their lives, Realtors can sell the homes quicker (making some commission on the lower prices that short sales receive is better than no commission on no sales), and the lenders get what were non-performing assets back on the market in less time. So it works for everyone.
H.R. 6153 has the potential of being a win-win for the housing industry and helping to pull the marketplace up by its bootstraps…that is if it isn’t watered down in committee first, or has some other pork barrel project attached to its approval.
We’d like to know what you think. Should second lien holders be forced into a corner and either make a decision or get out of the way?