South Philly Review

Despite months of anguish, new guidelines offer hope

Benny Kass
Inman News

DEAR BENNY: Almost six months ago, we made an offer to buy a condominium, under a short-sale arrangement. Our real estate agent called it a clean deal, as we are paying cash and all closing costs.

Our agent has called the listing agent and I have called the bank that holds the current mortgage (although they say they cannot discuss this with me for legal reasons) to try to learn why we cannot get an answer to our offer. My wife and I are anxious because we want to resolve this one way or the other. Didn't our president get a new law enacted that is forcing the banks to respond promptly? We need some help, and the bank is dragging its feet. --Bob

DEAR BOB: Although the federal government is attempting to get lenders to shorten the time they have in which to respond to short-sale proposals, there currently is no federal law on this subject.

However, on Nov. 30, 2009, the Department of the Treasury issued guidelines that lenders are encouraged to follow. It is a complex process. Homeowners who are underwater can request that their lender preapprove short-sale terms. Although it is not clear how long the lender (or the servicer of the mortgage) has to respond, once the lender determines the amount it will be willing to accept from a short sale, the borrower has 120 days in which to find a buyer for the property.

When the homeowner enters into a sales contract with a potential buyer, and assuming that the lender has already preapproved the terms and conditions for a short sale, the lender must approve or disapprove the short sale within 10 business days after receiving the sales contract.

Accordingly, if you are a homeowner in financial trouble, talk with a real estate agent to start the preapproval process. This will take the most time, so you should begin this as soon as possible. There is a lot of paperwork involved that has to be presented to the lender.

The Treasury directive requires that once the short sale takes place, the homeowner/seller must be fully released from future liability. This has been a real problem in the past, since many lenders -- after allowing a short sale -- were still going after their borrowers for the deficiency -- the difference between the net sales proceeds and the outstanding balance of the loan.

You can access this directive from the Web site of the Home Affordable Modification Program. Although lenders are encouraged to follow the guidelines now, technically they do not take effect until April 5, 2010, and will sunset Dec. 31, 2012.

DEAR BENNY: I am shocked by the extent of the deception and downright fraud being perpetrated on timeshare sellers through so-called "timeshare marketing" companies. My wife has been handling the listing of our "timeshare week" and has signed up with at least four companies. Each promise quick results or money back.

Once you start you are on the "list" and start receiving calls from multiple "boiler room" operations stating that they have an offer in hand, usually at more than you have listed the property at. All they want to proceed with the deal is $900 to cover expenses with title search, etc. Most if not all of these outfits operate out of Florida in the Orlando and Palm Beach areas.

I have contacted the attorney general's office of Florida and basically was told to be careful and not to give any money up front. These companies swear that they have buyers and that we should trust them.

This could be one of the biggest scams presently going on in the U.S. The targets are usually seniors, like my wife, who used her Social Security money to advance a couple of these companies. Of course, they never call back. It would be interesting to see how many of your readers have been approached by these operations and what their experience has been.

If you question the callers too much or ask hard questions, they simply hang up. I have written a couple of Better Business Bureaus in Florida and they are sympathetic but have no remedy.

I suggest it is time for the attorney general of Florida to conduct an investigation into this matter and grand juries should be convened to also address the issue. To date, despite numerous requests, we have not had any money returned.

I have a fairly good e-mail record of communications with these companies, many of which simply go out of business and open up somewhere else in the state. Florida is too lax and senior citizens are being hurt. --Jack

DEAR JACK: Many thanks for sending me this information. Because it is very important, and because a lot of the e-mail questions I receive involve timeshares, I am sharing your comments with my readers.

I can't force the attorney general of Florida -- or any state for that matter -- to investigate these companies, but if enough consumers send complaints to their elected representatives (both in Congress as well as at the state and local level), perhaps some action will be taken.