Although getting short sales approved by lenders has been getting easier over the past six-months as part of a settlement with the state attorney general, new short sale requirements are going to be adopted by some of the largest mortgage servicers. These requirements are expected to speed up the approval process which is good news for Sacramento homeowners who need to sell a home which is worth less than they currently own.
Over the past almost seven years we have gone from a short sale process that in some cases took a year or longer to get approved to what we currently tell our clients, ’10 to 12 weeks.’ The new requirements being implemented states, servicers will be required to make a decision on a borrower’s short sale request within 30-days of receiving the request. The caveat here is the request must be complete including all documentation required by the lender.
Servicers will also be required to notify borrowers within 30-days of any documentation which is required and missing from the short sale request. Although not allowed in California, servicers will 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.
When the new requirements are in force, compliance will be monitored and lenders who are in violation will be fined.
What the state attorney generals are attempting to accomplish is speeding up the short sale process which is very valuable. If a full and complete request is sent to the servicer, they must give an approval or decline within 30-days which will be a major improvement over what we have now.
It is unclear at this time if the new requirements for the five participating banks include short sale requests for junior lien loans. Second or junior loans remain one of the most difficult aspects of getting short sales completed. Often both lenders approve the short sale but with different terms, such as the senior lender allowing the junior lender to receive $4,000 of the proceeds to release their lien and the junior lien holder demanding $6,000 for the same release. To successfully close the short sale we need both approvals to agree. Â
