Changes to Short Sale Laws

According to the Indiana Association of Realtors (IAR Advocate 11/06/09), it is now Indiana state law that lenders must acknowledge short sale offers within 10 days. Under the 2008 law, lenders then have 30 days from receipt of the offer to accept or reject the offer.There is an on-line complaint form that can be filed with the Indiana Department of Financial Institutions (DFI). The DFI uses the complaints to track and establish patterns with certain lenders and use regulatory authority to investigate.Additionally, the Homeowner Protection Unit of the Indiana Attorney General has enforcement authority over the complaints. The complaints should continue to be filed with the DFI, with the field that the Homeowner Protection Unit should investigate marked (Field #18 on the Indiana complaint).We repeatedly hear from agents that the reason short sales do not move to closing is that it sometimes takes the sellers months to respond to offers.I strongly suggest that every agent check and see if their state has a similar law on the books and let the lender know you know about it when submitting a short sale offer. I know somewhere on our future short sale offers will be a sentence requesting a response by a certain date “per Indiana Statute” as a reminder to the lender that there are statute imposed time limits in place. This would also do to notify the lender of the time limits if they were not aware of them.Perhaps we can use our state laws to move our short sales along and keep them from becoming “long sales”.I also strongly suggest that agents working with lenders as short sale reps make their clients aware of any local or state laws of this nature. Be aware that just like a like a REO AM, the short sale AM is most likely dealing with properties in multiple states and jurisdictions and it is our job to protect them and make sure our clients are within the local laws.
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  • I understand the intent of the regulation but there appears to be no teeth. File a complaint and there could be an investigation. Goverment mandates often don't study the long term influences of their mandates. Could this then just force the properties to foreclosure faster?
  • Great news I'm an independent short sale negotiator and processor and this is the most frustrating aspect of the process. Beyond the time it takes to put a comprehensive file together and get all the players on the same page, waiting for lenders is so unnecessary. Thank you for your considerate post.
  • Everything you mentioned Franklin has to do with a physcial item at a physcial location, and of course local/state laws would apply. But when you are talking to a lender on the phone or email who's office is all away across the Counrty and they refuse to follow these guidelines, who's going to enforce it? No one.

    I fully understand your point and agree with it 100%. But it's just not possible to make someone comply with ANY law who is not in that juridistion. I just do not see how that is possible. Now I could be wrong (my wife calls me out every chance she gets!), but you are right, it's best answered by an attorney.
  • Steve,
    While I am not an attorney (shudder) and I am certainly not giving any legal advice, I think I may have to disagree. Banks must abide by the laws of the state, county and municipality where the property is located. That is why there are attorney closing states and title company states, code violations REO registration in some cities and lawsuits that have been brought about by former occupants who claim that valuable items were lost or stolen when the property was trashed out, for example. I do not think that any of these are covered by federal law. While it would be nice to have this as a federal mandate across the board, I will take what I can get. Perhaps there is an attorney out there that could comment. Are the changes to Indiana law completely unenforceable unless the bank is located in the same state as the property as Steve seems to think? Or, is it a first step in making Short Sales easier to get done? Maybe this would be a good question for Ask the Attorney, Steve.
  • One thing about this that we all need to keep in mind is that State laws are NOT enforceable in another state, If the bank is located in another state then you are, they do not have to abide by your State's laws.

    I have to aree, it's a great idea, but until becomes federal law, it's all smoke and mirrows.
  • This is why I love this forum! Great ideas and news that we can check on in our own states. Thanks
  • This is great! That's a type of government regulation that can have a positive impact. Thank you for sharing.
  • This is really good news. I'm going to check with our board to see if there are any statutes in Florida pertaining to this. We have more short sales than anything else here! Thank you for sharing!
  • Donna,
    Sorry, I know nothing of PA laws. I suggest you check your state association website.
  • This is really good news!
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