Transaction and Regulatory Committee Distressed Property Task Force Federal Committee
This material is for discussion purposes only and has not been approved by the Transaction and Regulatory Committee, Federal Committee, Executive Committee or the Board of Directors.
Issue: Should C.A.R., in conjunction with NAR, “SPONSOR” legislation to mandate lenders and servicers to respond to a short sale request that approves the short sale or provides a counter offer within 15 calendar days of receipt of a completed package per lender requirements and a fully executed offer?
Options: 1. Take a “SUPPORT” position on legislation that would mandate servicers to respond to a short sale request within a specific timeframe. 2. Take an “OPPOSE” position on legislation that would mandate servicers to respond to a short sale request within a specific timeframe. 3. Take a “WATCH” position on legislation that would mandate servicers to respond to a short sale request within a specific timeframe. 4. Take no action
Status/Summary Transaction and Regulatory Motion from Winter 2011 Meetings: That C.A.R., in conjunction with NAR, propose legislation to improve and ease the short sale process, including a provision to require that lenders approve or disapprove a short sale approval request within 15 business days of receipt of a completed package per lender requirements.
C.A.R.’s Federal Committee voted not to approve the Transaction and Regulatory Committee’s motion.
The C.A.R. Executive Committee has assigned the Distressed Properties Task Force with the responsibility of reviewing, deliberating and proposing policy direction for the Association on the issue of mandating responses to a short sale request within a specific timeframe.
Mandatory Response to Short Sale Request: Over the past three-years, a major complaint of REALTORS® about the short sale process has been the lack of communications on the part of servicers when a short sale request has been made. Response times to short sale requests have varied from servicer to servicer and loan to loan. In response to this, the Treasury Department’s HAFA program has put forward within its guidelines a 10 business day response time for servicers to respond to a HAFA short sale request. It should be noted, the 10 business days is applicable to a HAFA offer where the servicer has already approved a prelisting price.
NAR has successfully advocated for Congress to introduced H.R. 1498, the Prompt Decision for Qualification of Short Sale Act, that will require a response to a short sale request within 45 days otherwise the offer will be deemed accepted. The proposed bill has certain exceptions to the 45 day rule. The first exception is if there is a contract between the servicer and the investor that would prevent them from complying with the 45 days. The second exception is for preexisting agreements between the mortgagor and the mortgagee or servicer detailing the procedure and terms for approval of a short sale.
Outlook: During NAR’s May meetings they will ask members to advocate for cosponsors of the bill and to hold a hearing.
Support: Supporters of a prompt response say: • Whether it is 15 business days from the submission of a completed short sale offer or 45 days from a short sale request, both of these times are more than ample to provide for a servicer to obtain a response from an investor. • The proposed legislation allows for the existing contract between the servicer and investor to take precedence over the 45 days, therefore this proposed legislation will not be burdensome. • The servicer may also deny the short sale request or simply ask for additional information to make their decision. They don’t HAVE to approve the short sale request.
Opposition: Opponents of a prompt response say: • If servicers could respond quicker they would. Once they contact the investor the process is out of their control. • Placing a deadline on the short sale response will more than not force the servicer to respond with a “no”.
C.A.R. Policy: C.A.R. has pushed lenders and servicers to expedite responses to short sale requests as part of making the short sale process easier and more efficient.
NAR Policy: NAR has proposed and supports H.R. 1498.
Should C.A.R., in conjunction with NAR, advocate that servicers must respond to a short sale request within a specific timeframe?