Regulation X and how it helps sellers sell their homes through a short sale:
If you owe your mortgage company more than your house is worth then you are underwater, but you can still sell the property short of the amount you owe through what is called a short sale. In order to sell your home in a short sale you have to get a contract for the sale of your property and your bank has to approve the contract. This often results in a waiver of deficiency to you and lets you walk away from the property without owing the bank anything.
However, short sales can be tricky as it is not unusual for sellers to have a tremendously difficult time obtaining short sale approval from the banks. In my personal experience, some banks, through their mortgage servicing companies, often delay giving a seller an approval by making incessant demands for additional, duplicative, or other unnecessary documents. In my personal experience, a bank may also avoid giving an approval by simply ignoring the short sale application until the buyer cancels the deal or the bank is successful in getting a foreclosure judgment against the sellers and sells the property.
Fortunately, due to the Dodd-Frank Act and Regulation X, the servicing companies are now required to acknowledge a complete short sale loss mitigation application and respond to them within 30 days of receipt of a complete short sale application. Under Regulation X, these servicing companies must respond to demands that they correct errors in demanding unnecessary documentation and cannot simply ignore applications. While working at Diamond & Lesueur, PC, I have seen multiple banks approve short sale applications once our office has used Regulation X to demand the servicing companies correct errors involving unnecessary documentation demands, for ignoring a complete application, or other servicing errors. Sellers should be aware that they have rights when it comes to getting the banks to approve their short sale applications through this wonderful borrower friendly law.
The materials provided are for informational purposes only and should not be viewed as legal advice. It may also be viewed as advertising material. You should contact your attorney directly, or Drake Shunneson, to obtain advice to any issue or problem. This article, by itself, does not create any attorney-client relationships and the opinions are those of the individual author and do not reflect the opinions of any law office or law firm the author is, or was, associated with or any other individual attorney, entity or individual.