U.S. Sen. Sherrod Brown said Wednesday he will push legislation aimed at speeding up the process of real estate “short sales” as a way of getting the nation’s housing market, and by extension the economy, back on track.
In a conference call with reporters, Mr. Brown (D., Ohio), said red tape among the nation’s largest banks is delaying and often killing short sales, causing potential home sales to break down and prolonging the foreclosure or distressed home dilemma in the housing market.
A short sale is an agreed-upon sale of real estate in which the proceeds from selling the property fall short of the mortgage amount owed by the seller.
In a short sale, the mortgage holder — usually a bank — must agree to the short sale and often does so with the realization the foreclosure process will result in lesser proceeds.
Mr. Brown said small community banks can often decide on whether to allow a short sale in an hour. But larger banks can take months, frequently delaying a short sale so long the deal falls through.
“It means homes aren’t being sold even when there’s a willing buyer and willing sellers,” Mr. Brown said.
With nearly one in four Ohio homeowners underwater on their mortgage — that is, owing more than the home is worth — more short-sale transactions “could make a difference for our economy,” he said.
Mr. Brown’s office released a county-by-county list on Wednesday that shows the percentage of homeowners whose homes are underwater on their mortgages. Lucas County was at 38 percent while Wood County was at 22 percent.
The senator said that the chances for getting legislation passed this year appear to be good. Mr. Brown and Sen. Lisa Murkowski (R., Alaska) are co-sponsoring legislation that would require banks to decide within 30 days whether to approve a short-sale transaction once a legitimate offer has been made to purchase a home that is underwater on its mortgage. The bill has bipartisan support, he said, and a similar bill has been introduced in the House by a Republican congressman from Florida, Mr. Brown said.
The senator said he and other members of Congress will push hard to move the bill along in the next few weeks.
“This is about helping to stabilize home values ... and ending the waiting game and stopping the delays that ends up with a drag on the economy and home market,” Mr. Brown said.
During the conference call, Mr. Brown introduced Seth Task, an officer with the Cleveland Area Board of Realtors, who described how delays by Bank of America had derailed an earlier potential short sale of a home owned by Cleveland-area resident Kathy Hlad, and how the bank continues to hamper efforts to sell the house, which is now set for a sheriff’s sale.
Mr. Task said originally he was told by the bank to involve a title company with the sale, and later the bank invalidated the sale because he used a title company.
“Bank of America literally threw the short sale out of the system and we had to start all over again because we had a title company and they wanted a Realtor,” he said.
Then after working 8½ months on a short sale, a buyer made an offer and the bank counteroffered but the buyer was out of town.
“When they came back to town and accepted the counteroffer the bank said that offer had dropped out of their system and they had to come up with new valuation for the home. The new valuation was up 8 percent [to $82,000] over the previous one,” Mr. Task said.
The buyer would not go higher than the previous $77,000 bank counteroffer, so the buyer walked away from the deal.
“We found another buyer and have been working with the bank to get that worked out,” Mr. Task said. But now the bank wants $80,000 and the buyer will only go to $73,000.
“It’s a different story all the time with them. They want new documentation that we’ve already sent them three or four times. It’s a mess,” he said.
Contact Jon Chavez at: email@example.com or 419-724-6128.