Some good news for those in California considering a short sale with SB 306 being signed by The Governor which makes changes to the short sale process and in doing so may avoid foreclosures. Details so far is a bit spotty but I found some information on Senator Ron Calderon’s site regarding the bill.
“California’s slumping economic climate and housing market have combined to create a fertile climate for the exploitation of consumers,” said Senator Calderon (D-Montebello), chairman of the Senate Banking, Finance and Insurance Committee. “My legislation is aimed at protecting struggling borrowers who desperately want to keep their homes, aiding consumers who wish to purchase homes, and jump-starting our housing recovery.”
A short sale is a sale in which a homeowner sells his or her house for less than what is owed on the mortgage, with the knowledge and approval of the lender. Short sales help homeowners avoid the financial and emotional toll of a foreclosure; help neighborhoods avoid the decay, vandalism, and negative pressure on property values that have come to characterize vacant, foreclosed property; and help lenders avoid the money-losing foreclosure process.
SB 306 facilitates short sales, by ensuring that escrow agents receive up-to-date, accurate information they need to cleanly transfer title to a property that is sold via a short sale. Prior to enactment of SB 306, escrow agents frequently lacked the information they needed to cleanly transfer title on short sale properties, which led to delays, and sometimes cancellations of these sales.
SB 306 also clarifies last year’s SB 1137, a bill that required lenders to contact borrowers to discuss options for avoiding foreclosure; gave renters of homes that fall into foreclosure more rights; and gave local governments greater ability to crack down against foreclosure-induced blight. The clarifying changes in SB 306 will help borrowers and renters, by resolving unintended ambiguity in the prior legislation.
The bill was co-sponsored by the California Escrow Association, United Trustees Association, and Escrow Agents’ Fidelity Corporation. It will become operative on January 1, 2010.
“Our housing market can be the engine that starts us on our return to economic prosperity,” said Senator Calderon.
Stayed tuned as more information becomes available on this important bill. Find more information in our Short Sale Category.
Here is a recent update from the California Association of Realtors regarding SB-306. A few people in the industry have been giving out some bad information.
Recently enacted Senate Bill 306 does not require lenders to review short sale requests from sellers and their agents within 21 days. The new California law, which addresses certain escrow procedures, has been mischaracterized by some practitioners as landmark legislation calling for a 21-day turnaround for short sale approvals.
The new law inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow. The new law essentially requires, after a short sale has already been approved, for the lender to respond to a request for a short-pay demand statement within 21 days. The lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.
Another provision of SB 306 may also cause confusion. In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not review that closing statement promptly. Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is “not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrowholder.” The new law does not bind a lender to a short payoff amount in an offer that the lender has not approved.
Senate Bill 306 contains other technical changes in real estate related laws, such as, but not limited to, the following:
Expanding the existing requirement for a lender to contact certain borrowers to explore options for avoiding foreclosure at least 30 days before filing a notice of default, to include not only owner-occupied residences, but also owner-occupied residential property with two-to-four dwelling units.
Extending the existing requirement for a lender to record a notice of sale from 14 to 20 days before a trustee's sale. This provision does not change existing law requiring a lender to wait at least 20 days after mailing a notice of sale before conducting a trustee's sale.
Here is a recent update from the California Association of Realtors regarding SB-306. A few people in the industry have been giving out some bad information.
Recently enacted Senate Bill 306 does not require lenders to review short sale requests from sellers and their agents within 21 days. The new California law, which addresses certain escrow procedures, has been mischaracterized by some practitioners as landmark legislation calling for a 21-day turnaround for short sale approvals.
The new law inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow. The new law essentially requires, after a short sale has already been approved, for the lender to respond to a request for a short-pay demand statement within 21 days. The lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.
Another provision of SB 306 may also cause confusion. In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not review that closing statement promptly. Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is “not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrowholder.” The new law does not bind a lender to a short payoff amount in an offer that the lender has not approved.
Senate Bill 306 contains other technical changes in real estate related laws, such as, but not limited to, the following:
Expanding the existing requirement for a lender to contact certain borrowers to explore options for avoiding foreclosure at least 30 days before filing a notice of default, to include not only owner-occupied residences, but also owner-occupied residential property with two-to-four dwelling units.
Extending the existing requirement for a lender to record a notice of sale from 14 to 20 days before a trustee's sale. This provision does not change existing law requiring a lender to wait at least 20 days after mailing a notice of sale before conducting a trustee's sale.