Considering the fact that 100 percent financing (often achieved with secondary liens) contributed to the financial difficulties that many homeowners now face, lawmakers have proposed a bill titled “The Fast Help For Homeowners Act”, which addresses the issue of subordinate liens in a short sale process.
In an effort to speed up the current pace of short sale transactions, this bill, which is supported by the National Association of Realtors, will give subordinate lien holders only 45 days to reply to short sale requests.
Sponsored by U.S. Rep. Jerry McNerney (D-Calif.) the bill was submitted to Congress on July 19th in hopes that the passage of this legislation will lead towards stabilizing the market.
"As the leading advocate for homeownership, Realtors® know that issues and delays with secondary lien holder remain an obstacle to streamlining the short sale process, NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami said. Short sale negotiations are much more difficult for borrowers who have multiple servicers involved and ongoing delays continue to severely limit the number of homeowners who are approved for short sales, forcing many homeowners into foreclosure."
The bill would require primary lenders to notify secondary lienholders of a short sale request, and would place a deadline for a response from individuals and institutions in secondary lien status to both the primary lender and the homeowner.
Veissi explained the problem. "Second mortgage lien holders frequently hold up and cancel the short sale transaction while trying to collect the largest possible payout in exchange for releasing the homeowner's lien, even though the secondary lien holder often gets nothing if the home ends up going into foreclosure. While efforts have been made to improve primary lien holders' response times, issues still abound with second and subsequent lien holders, and this legislation is a step in the right direction."
Creating a systematic process to deal with short sale approvals can benefit both the seller and prospective buyers in that the price averages will more accurately reflect the marketplace since a shadow inventory would be slim or in some cases, perhaps, non-existent.
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