Recently, in connection my my representation of an individual who was far behind in his mortgage, I encountered the following scenario. The borrower (my client) has not made a mortgage payment for more than two (2) years. The house has been on the market for 18 months. Because of my experience as a Massachusetts title attorney with more than 40 years of real estate experience, I located a suitable listing agent, and we received a cash offer for the property to close in no longer than 45 days.

This is where the problems began. We made a submission to the Lender (I would like to share the name but the sad truth is it could be any of a number of Lenders) which included the following:

     1. A signed Purchase and Sale Agreement

     2. A verified statement from both Buyer and Seller that they had no affiliation with each other and were not related by blood or marriage.

     3. Two(2) separate Broker’s Opinion of Value for the property, which included no fewer than 3 recent sales of comparable property.

     4. A proposed HUD-1 Settlement Statement, which set forth the real estate broker fees, the legal fees, the stamp taxes and recording fees for the transaction. There were back taxes due and owing and they were included on the HUD-1, as well.

This statement was submitted more than a month ago, and we cannot even get a “denial” from the Lender. An extremely low-level employee, who has refused to inform me as to the name of her supervisor, has informed me that this is her project, and since she is so “overwhelmed” with requests for short sale consents, she doesn’t know when she can get to ours. The fact that we have a 45 day “window” and a Buyer who will probably walk shortly thereafter has not moved her to act in any way.

In today’s (July 7, 2009) edition of the Boston GLOBE, there is an article indicating that with respect to modifications or mortgages, the Lenders are dragging their heels because they do not want to take the financial “hit” associated with modifying the mortgage. I am suggesting that the same type of “hidden agenda” exists for short sales. Congressman Barney Frank was adverted to in the story, and his comment that the government would have been better served giving TARP money to beleaguered borrowers to catch up on their mortgages than to Lenders, who are really not using the money to get things moving in the real estate industry.

My suggestion to all of you is to contact Congressman Frank to demand that he institute the following procedures with regard to short sales from all Lenders, but at least to Lenders who have received TARP Funds:

     1. There should be a formal protocol as to what documents are required for a Lender to consider a short sale request.

     2. All short sake requests which include the requisite documents set forth in the protocol shall receive responses from the Lender within fifteen (15) business days of the date received.

     3. if the request for short sale is denied, the Lender shall be required to furnish specific reasons for the denial, and a value for the property which would make the short sale acceptable. There must be supporting documentation which would substantiate the higher value.

All of us are working hard to effect real estate transactions to get the market moving again. Shirt sales, although painful for the Lender initially, represent a way to set reasonable valuation benchmarks for moving forward toward recovery. Many Lenders have been compensated for the losses they may sustain with short sales (or modifications) through receipt of TARP money.