SHORT SALE RESPONSE REQUIRED WITHIN 30 DAYS
As part of the unprecedented nationwide mortgage settlement, home loan servicers are now required to respond promptly to short sale requests. The new rules state that loan servicers must provide borrowers with a decision within 30 days of receiving a complete short sale request package. Home loan servicers are also charged with the responsibility of contacting a borrower within 30 days of submission, and notifying the homeowner of any missing documentation needed to consider and/or approve the short sale.
If a home loan servicer fails to complete these steps within the allotted 30 days, in regards to more than 10% of their borrower's short sale requests, they will be considered to be in "potential violation" of the agreement. If the servicer does not take action to correct the potential violation, they could receive a penalty of up to $1 million, with subsequent penalties of $5 million for repeat violations.
60 DAYS TO DETERMINE SHORT SALE ELIGIBILITY FOR FANNIE AND FREDDIE HOME LOANS
As of June 15th, 2012, short sale requests made regarding Fannie Mae and Freddie Mac owned home loans will be handled in a similar manner. Fannie and Freddie representatives must also respond to a short sale request within 30 days. However, Fannie Mae and Freddie Mac will have 60 days to provide a homeowner with a final decision regarding approval or denial of the short sale.
WILL NEW SHORT SALE REGULATIONS REALLY SPEED UP THE PROCESS?
Anything that aids in expediting short sales would be welcome by both distressed homeowners and California home buyers, as the existing, lengthy short sale process affects both buyers and sellers, negatively. And, while it's evident that lenders have been leaning toward short sales more and more every month in 2012, it's unclear if these changes will speed up the short sale process as much as we'd all like; Many homeowners have multiple loans against their property, and there are times when borrowers have additional liens, outside of a mortgage, which must also be negotiated. Since the current market value is used to determine the sales price of a short sale property and there are only so many ways that you can slice a pie, all parties owed must be consulted and agree to their reduced share of the short sale proceeds.
IS THE FOX GUARDING THE HEN HOUSE?
One troubling fact regarding the new short sale regulations, is that home loan servicers will be monitoring their own results and conducting their own internal, quarterly reviews. Although these internal reviews will be overseen by North Carolina Banking Commissioner, Joseph Smith, we merely have to look at the track record of the big lenders and servicers to know that we all need to be wary of their reported short sale compliance results.