Speed up short sales

3/23/2013

Nationally, some housing indicators are improving. But there’s less to cheer about in Lucas County, where nearly four in 10 homeowners with a mortgage owe more on their houses than they’re worth, and where foreclosures have spiked in the past two months.

Struggling homeowners here need a break. U.S. Sen. Sherrod Brown (D., Ohio) wants to help with proposed legislation designed to promote home sales.

Housing starts rose in February for the nation as a whole. So did construction permits. Employers hired 48,000 construction workers, the most since before the recession began in 2008. In some parts of the country, demand is driving up home prices.

But more than 10 million U.S. homeowners remain “underwater” on their mortgages. In Lucas County, 38 percent of owners owe more than their homes are worth. That’s a higher rate than in all but two of Ohio’s 88 counties.

In the Toledo metropolitan area, which includes Lucas, Wood, Fulton, and Ottawa counties, one of every 749 housing units was in foreclosure last month. Foreclosures in February were up by 52 percent compared to the same month of 2012, after a 102 percent spike in January over the year-ago month.

One way out for homeowners drowned by mortgage payments is a “short sale.” The mortgage holder agrees to a sale of the property for less than what is owed.

A short sale is often the last resort before foreclosure. Both the owner and the bank may benefit from not going through the foreclosure process. And the new owner can buy the property at or below market value.

Yet “homes aren’t being sold even when there’s a willing buyer and willing sellers,” Senator Brown says. The reason, he says, is that the short-sale process can take months or even years. Red tape imposed by banks — especially large, national ones — is frequently the cause.

Mr. Brown has reached across the aisle to co-sponsor short-sale legislation with Alaska Republican Lisa Murkowski. Under their bill, banks would have 60 days to decide whether to approve a short sale after a legitimate offer is made to buy an underwater home. A similar bill has been introduced in the House.

Speeding up the process would mean more successful short sales. That would be good for the housing market, help stabilize and protect neighborhood and home values, and prevent the deterioration of underwater properties.

Enactment of this legislation would be a small victory for bipartisanship. It would be a big victory for underwater homeowners in northwest Ohio who have run out of options.