Changes in state laws that went into effect June 7, 2012 provide significant benefits to homeowners involved in a short sale or facing foreclosure.
Time Limitation for Collecting on Deficiency
A lender agreeing to the short sale of an owner-occupied property must now provide written notice of whether it intends to either waive or reserve its right to collect on the deficiency. Also, the time period to start legal proceedings to collect on a deficiency has been reduced from six years to three years. Again, these changes only apply to short sales of owner-occupied properties. They do not apply to foreclosures. In the case of foreclosures, a lender has up to six years to collect on a deficiency.
Referral to Mediation
Homeowners that qualify for mediation under the Foreclosure Fairness Act may now be referred to mediation up to 20 days after a notice of trustee sale has been recorded. Prior to the change in the law, once a notice of trustee sale was recorded, a referral to mediation was no longer available.
Time Period for Trustee’s Sale
The time period between recording the notice of trustee sale and holding the trustee sale has been extended from 90 days to 120 days. This change applies to owners of owner-occupied residential properties who are entitled under the law to receive a letter from their lender notifying them of pre-foreclosure options.
The above is just a basic summary of several new changes. We always advise homeowners to consult an attorney regarding how these changes will affect their own situation. We offer free attorney and CPA consultations as part of our service. Now, more than ever, brokers need to be aware of the benefits of short sales for their clients. If you have questions about how to best proceed with a short sale, call Richard Eastern at 206-612-5541.