I had the opportunity to hear Robert Noggle, Esq. speak yesterday about the new HOBR legislation. He helped clear up a misconception that was pervasive and being mistakenly sold to the public at large.
This misconception is that the banks can’t ask for an “Arms Length” affidavit in a short sale. The banks can and likely will continue to require this document. That means that the borrower can’t sell the home to a friend or family member with an arrangement to buy it back.
The other important element to this legislation includes: The “bank” can’t proceed with foreclosure while a borrower is involved with a short sale or a loan modification. The “bank” is required to acknowledge receipt of application within 5 days and then approve or decline it within 30 days.
The biggest element to the legislation is the penalty for failure to comply is $50,000 in statutory damages plus attorney fees or three times actual damages. If the “bank” were to violate the provisions, the borrower has the right to sue for those damages whether the violation was willful, reckless or intentional.
The law applies ONLY after an NOD has been filed. If the bank has not filed to foreclose this law does not apply!
Short sales will continue to be the preferred method of dealing with homeowners in distress by the banks.