New 10 Day Time Limits on Short Sales in Colorado Springs!

The most frustrating component of a short sale is waiting for the bank to approve the buyer's offer. Now that all may change under new federal guidelines that give lenders a 10-day limit in which to respond to purchase offers.

The U.S. Treasury rules, which will be applicable to banks that owe the federal government the repayment of TARP bailout funds, start to apply in April 2010. 

The Treasury rules, in addition to imposing a 10-day deadline for bank decisions, call for sellers to receive $1,500 moving allowances-and for the sellers to not have to repay any of the debt. Also, lenders will get $1,000 to cover administrative and processing costs, while investors owning the mortgages will receive a maximum $1,000 for allowing as much as $3,000 of a short sale's proceeds to be distributed to less senior lenders.

The 83 loan servicers participating in the Obama administration's Making Home Affordable loan modification program are required to follow the guidelines for all borrowers who have requested short sales or who did not complete loan modifications. The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which constitute about half of all U.S. mortgage debt. The two government-run mortgage companies are working on their own guidelines.

A spokeswoman for the Treasury says it will hand down "substantial" penalties to lenders that don't comply. The agency said it can fine lenders, withhold or reduce incentive payments, or require improperly rejected loans to be modified. Lenders have blamed short sale delays on the complicated nature of the transactions, sheer numbers of deals and on borrowers who don't submit proper paperwork in a timely manner.