Bill would shorten claim period in short sales
Banks would only have 90 days to file a claim on the unpaid balance of a home in a short sale under a bill passed out of a House committee unanimously Monday.
The proposal, SB42, by Sen. Wayne Niederhauser, R-Sandy, would change the current law that gives lenders six years to chase after money not recovered in a short sale, but the lawmaker argued that was too long. He said it was hurting real estate agents trying to sell distressed properties and it kept the property owners who initiated the short sale from being able to make future purchases.
With homeowners attempting short sales to avoid foreclosures, the threat of a deficiency judgment hanging over them for six years could make it tough for people to move on with their lives, Niederhauser, vice president of a real estate development company, said.
A short sale is an agreement between a lender, a buyer and a seller with the lender agreeing to accept a price worth less than the total loan. Under the law, banks could then turn around and sue the seller for the difference between the total mortgage and the lower price for which the property was sold.
Committee members asked if the banking industry was supportive of his proposal.
"They've been involved in the process and they'd be here today if there was a problem," Niederhauser said.