Following a recent settlement with the state attorneys general, new short sale requirements are to be adopted by the largest five mortgage servicers in the US, in the expectation that these will speed up what has become quite a lengthy process.
As part of the new requirements, servicers will be required to make a decision on a borrower’s request for a short sale within 30 days of receiving that request, reported Housing Wire. While this alone should help to reduce the processing time of short sales, a number of other requirements will help address key hold-ups in the process.
Among these, servicers will also be required to notify borrowers within 30 days of any documentation that is missing from their request, which is needed process the short sale. In addition, servicers will now be obligated to immediately notify borrowers if approval for their short sale rests on a deficiency payment being made. Should a deficiency payment be needed, servicers are required to establish a reasonable estimate of the amount of this payment.
The last major requirement is that the biggest five servicers will form an internal group, which is expected to carry out a review of all short sale requests made to the servicer.
Housing Wire reports that the new guidelines will be strictly monitored, with servicers liable to heavy penalties if they violate any of the new short sale settlement requirements. Should banks fail to meet the 30-day deadline on more than 10% of short sale requests, they will be considered in violation of the new rules, and face a penalty of up to $1 million, or $5 million if the offence is repeated.
As Chris Hanson, a short sale specialist with the Hanson Law Firm explained to Housing Wire, the general idea is to speed up the short sale process significantly:
“If a real estate broker can get a checklist from the bank detailing what documentation is needed, everything can be provided up front, and the bank will be required to give a thumbs-up or a thumbs-down within 30 days. That’s not a bad deal.”