Heads will roll if two federal agencies can’t solve a glitch that is keeping some home short-sellers out of the housing market, U.S. Sen. Bill Nelson said Tuesday.
In the Tampa Bay area and nationwide, some people who fell behind on their mortgages and held a short sale – sold their home for less than they owed on the mortgage – got caught up in a credit reporting mix-up.
Many of these short sellers are now eligible to apply for a new conventional mortgage, such as those purchased by the government-sponsored housing giants Fannie Mae and Freddie Mac.
However, they discovered that their credit reports reflected a foreclosure, rather than a less damaging short sale. Today, no one seems to want to take the blame for the erroneous reporting.
Nelson, D-Fla., was in Tampa to share these short sellers’ stories and to warn two federal agencies, the Consumer Financial Protection Bureau and the Federal Trade Commission, to find a solution.
Nelson brought up the problem at a Senate Commerce Committee hearing this month, but on Tuesday complained that he couldn’t get a straight answer out of representatives of the government regulators.
“I have put the federal government on notice, if they don’t do something to straighten things out in the next two months, I’m going to ask the president to start firing people in the regulatory agencies,” Nelson said.
At issue are the complex codes that creditors and credit bureaus use for negative events such as short sales and foreclosures.
Norm Magnuson, a vice president at the Consumer Data Industry Association, a trade group for credit bureaus Equifax, Experian and TransUnion, said there is a special designation for short sales that can distinguish them from foreclosures. However, he said Fannie Mae’s automated computer system, in particular, has trouble making this distinction.
A Fannie Mae spokeswoman could not be reached Tuesday.
Joining Nelson in Tampa on Tuesday were a few mortgage brokers and real estate agents who have witnessed the problem, as well as two homeowners caught up in it, George Albright of Trinity and Michael Dorman of Tampa. Both men sold their homes in short sales and have waited at least the two years it normally takes to qualify for a conventional loan, but the glitch has prevented them from qualifying.
Albright said he has qualified for a loan backed by the Federal Housing Administration, but it carries less attractive terms than a conventional loan.
If regulators and the mortgage industry can’t find a solution, Nelson, said, “We’re going to have a serious diminution of our ability to turn over real estate sales in our state.”