We often carp about elected officials in this space, generally decrying their lack of common sense, overall inefficiency and overt nepotism.
But even we have to admit, they do occasionally have some good ideas.
Recently, U.S. Representatives Robert Andrews, D-N.J., and Tom Rooney, R-Fla., proposed legislation that would require lenders to respond to consumer short sale requests within 45 days.
As home values continue to fall nationally, even while stubbornly remaining flat here at home, more homeowners are finding themselves stuck. We recently published a story to that effect, detailing how, even in relatively safe Massachusetts, real estate agents and their clients alike are beginning to feel a sense of gridlock setting in.
“Buyers are leery of future price declines and want to ensure they’ve found a bargain before taking the plunge,” we wrote. “Sellers, for their part, either won’t sell for less than they feel their house is worth, or can’t sell for less than what they owe the bank.”
A key weapon in breaking apart at least some of the gridlock would appear to be the increased use of short sales.
But if lenders aren’t inclined to act on short sale offers, then they’re only helping to further freeze the market, rather than acting to grease the skids, as it were.
Which is why this bill, in particular, makes so much sense. And while we’re not certain our beloved solons won’t find some way to muck it up, or even that it will win passage in its current form, we think the idea behind it is fundamentally very sound.
We’re sure lenders will complain of yet another regulatory burden, will bemoan the cost of having to hire extra administrators to expedite still more paperwork, and they’ll probably be at least a little right.
We understand some of the reasoning behind delaying short sale approval. Agreeing to accept less for a home than its outstanding balance means, in essence, that a lender is accepting defeat. Any hope that a deep-pocketed buyer might swoop in with a profit-making offer, that values will miraculously recover in the time between a short sale offer and final approval, or even that a struggling homeowner might be able to get back on their feet, vanishes once that short sale offer is accepted. The potential loss becomes a very real one.
But we see nothing in this bill mandating lenders to accept any short sale offer. Rather, all it does is ask them to consider offers in a reasonable amount of time, decide one way or another, and allow both the seller and potential buyer to either move forward or part ways.
And by being forced to consider more short sales, it seems likely to assume that lenders may in turn approve more of them as well. This will have the effect of both reducing the number of foreclosures, and increasing the number of home sales.
Heck, it may even create a marginal amount of new jobs in lenders’ offices – we think the title of “short sale administrator” sounds pretty legit, actually.
Lawmakers have been struggling for years now with how to help stanch the foreclosure bleeding, goose homebuying and create jobs. It seems this simple bill might do all three.
The fact that it appears to be – gasp! – a bipartisan effort is just icing on the cake.
We know the bill, if passed, won’t look much like its current iteration. We wouldn’t be surprised if that 45-day window turns into 60 days, or if the criteria for mandated short sale consideration is massaged so that any short offer has to be within a certain distance of the loan amount outstanding.
But the idea needs to stand. And for once, we applaud the legislators who proposed it.
