Bill Morris: New Short Sale Rules ... Good News?

New Short Sale Rules ... Good News?

This article hit the wire yesterday from Reuters:

"The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed "short sales" of homes and other loan modification alternatives to stem a rising tide of foreclosures."  More:  http://news.yahoo.com/s/nm/20091130/bs_nm/us_treasury_shortsales.

Of course simplifying the short sale process should be good news, and I am hopeful.  Having struggled with the existing process a number of times this year, I remain skeptical.

The new guidelines call for a 10-day lender response to a short sale offer.  However, I don't believe that the long response times in the past were an indication of lenders just "dragging their feet."  The problem has largely been understaffed and "over-guidelined" loss mitigation departments.  Suddenly asking for response in 25% to 30% of typical response times doesn't add the staff or eliminate the bureaucracy that have made short sales painful in the past.

In addition, artificially capping net proceeds for 2nd lien holders may be attractive from an oversight standpoint, but it doesn't do anything to resolve the real financial pressures for those lenders who intentionally took subordinated positions.  A very large part of the "problem" loans over the past several years were 80-10-10 or 80-15-5 packages in which the 2nd lender accepted higher risk in the expectation of higher return.  Just because Treasury now asks them nicely to accept $3,000 maximum proceeds, should that be immediately acceptable to their investors?

Maybe it's just been a long day, so please excuse my cynicism.  I really hope this is progress, but I'll wait to see some "real world" proof.

Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
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Comment balloon 3 commentsBill Morris • December 01 2009 08:35PM

Comments

That is good news and belief is in the pudding sort of speak. I have lost all confidence in the government as has most Americans.

Posted by Charles Stallions Real Estate Services, Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl. (Charles Stallions Real Estate Services Inc) almost 10 years ago

I also did a Blog in this subject and got alot of responses.  If you read the actual guidelines it is clear that there is no way for the government to implement these changes without Congress changing some laws.  The program relies on the lenders and investors to enter into contract with the government to be able to get the incentives.

Posted by Dawn Uselding, Short Sale Assistant (A New Dawn Real Estate Services, LLC) almost 10 years ago

Dawn, that's good info.  Any odds on Congress taking time to work on this any time soon?

Posted by Bill Morris, ABR, CRS, CDPE, ePRO, MBA (RE/MAX Capital City) almost 10 years ago

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