One sure way to reduce the deficit is to strengthen the economy—so more Americans have good-paying jobs and can support themselves and their families rather than relying upon the safety net to make ends meet. We have grown our way out of past recessions through a strong manufacturing sector and a robust housing market. But when empty homes are scattered from Cleveland Heights to Kennedy Heights, we know that the housing market still has a long way to go before it recovers.
Although many prospective home buyers have made legitimate, good-faith offers to purchase a new home, they often encounter banks that ignore or slow walk those offers when sellers owe more on their mortgages than the selling price of these homes. And right now, this is the case for nearly 25 percent of Ohio homeowners.
To help sell these homes and keep our economy moving forward, a short sale often makes sense. Short sales are real estate transactions that must be approved by the bank because the seller owes more on their mortgage than the proposed sale price. Both parties agree to the short sale process because it allows them to avoid a foreclosure – which typically takes longer to complete, involves hefty fees for the bank, and leaves a negative mark on the homeowner’s credit report.
For too many buyers and sellers, the time that it takes to complete a short sale is anything but short. Too often in a short sale, once a buyer makes a written offer and has paid her earnest money deposit, there is a break in communication between the loan servicer and the buyer of the short sale property. The breakdown deprives buyers of knowing whether their offer has been accepted, rejected, or countered – which prevents them from making offers on other homes.
This lapse in communication – especially when big banks are involved – makes it harder for families to move to Ohio. Kathy Hlad discovered this when she put her house, located in Lake County’s Concord Township, on the market in August 2010. Although a buyer submitted an offer on her house, her bank did not respond for eight months. When she finally heard back, the buyer was out of the country for an extended period of time and could not be reached to approve the counter offer. Because more than 30 days elapsed, the deal fell apart and the buyer walked away.
Simply put, homes aren’t being sold – even when there is a demand. Potential buyers – fed up with the waiting game that lasts for months on end – simply walk away. And sellers who may need to move for a new job – either don’t move or take a huge financial hit.
More efficient short sales could make a difference for our economy. If we’re going to recover from the housing crisis, we need to make it easier for qualified candidates to purchase homes.
That’s why I have introduced bipartisan legislation, the Prompt Notification of Short Sale Act, to improve the process for buyers considering a short sale.
First, the legislation would achieve creating greater accountability for the loan servicer and improved communication between the buyer and loan servicer by requiring a written response of an acceptance, rejection, counter offer, or extension within 30 days of the homeowner’s request. Last year, I met with a group of Ohio community bankers who said they could make a decision on a short sale in less than an hour. What a million-dollar community bank in Ohio can do in thirty minutes we’re asking multi-billion dollar banks to do in 30 days.
And it would help to bolster our housing market and our economy by providing homebuyers with certainty and assurance by giving them a final date at which they can close the transaction, or move on.
This common-sense legislation would help prospective home buyers – and distressed homeowners alike – while helping to rebuild our neighborhoods and fostering long-term economic growth.
This is about stabilizing home values – shoring up our economic future, and standardizing processes that make sense for Ohio families. It’s about ending a waiting game and stopping the delay that represents a dangerous drag on the housing market and our nation’s fiscal health. We cannot afford to wait any longer. Now is the time to stabilize the housing market and stabilize our economy.