Heller bill aims to streamline short sales

WASHINGTON - New legislation in Congress aims to streamline short sales of mortgage-troubled homes.

The bill by Sen. Dean Heller, R-Nev., would require banks to acknowledge a homeowner's short sale request within 30 days, and to issue a decision within 60 days. Homeowners could be awarded $1,000 if a lender misses the deadlines.

"By placing a shot clock on these decisions, it will reduce the amount of time it takes to sell property, improve the likelihood that the transaction will close, and reduce the number of foreclosures in Nevada and across this country," Heller said Wednesday in a speech on the bill that was introduced May 15.

The bill tracks guidelines that go into effect June 15 for mortgages held by Fannie Mae and Freddie Mac. Those require servicers to review and respond to short sale offers within 30 days, and to update the borrower weekly if the review is taking longer.

"What Senator Heller did was spread it out over all the lenders," according to Kolleen Kelley, president of the Greater Las Vegas Association of Realtors.

Kelley and other Nevada real estate agents were in Washington last week meeting with members of the state's congressional delegation on housing issues including short sale reforms.

In Southern Nevada, homeowners generally wait two months or more for a response to a short sale offer, and sometimes much longer, Kelley said. The process generally becomes more complex and lengthy if the home carries a second mortgage.

A short sale is when a lender agrees to sell a house for less than what a borrower owes on a mortgage. For homeowners, it's seen as a simpler and less credit-damaging alternative to foreclosures, and experts see short sales outpacing foreclosures this year.

In Southern Nevada, 29.9 percent of all sales of existing homes in April were short sales, according to the Realtors association. The peak for short sales was 34 percent in June 2010. Short sales can be lengthy transactions, prompting calls to streamline the process. According to RealtyTrac, which compiles data on troubled properties, the average time for completion of a short sale was 306 days in the first quarter of this year.

"Home buyers, sellers and real estate agents have long observed that banks have been slow to approve home short sales," Heller said . "Current delays in approving short sales are a major challenge to consumers and to Realtors. These delays can cause canceled contracts and homeowners being forced into foreclosure. Though short sales are seen as a far better outcome than foreclosure, finding ways to improve this process and make this process more efficient has been very, very difficult."

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760. Follow him on Twitter @STetreaultDC.