This video from one of my favorite movies (Monty Python and The Holy Grail) is symbolic of what happened to the new Illinois short sale law as it wound its way through the legislature. You’ve seen it. King Arthur and the Black Knight get into a sword fight. King Arthur carves up the Black Knight limb by limb, until nothing remains. That’s pretty much what happened to this new statute just signed into law last week.
When I first saw that a new short sale law was working its way through the legislature, I hoped that it would help clear out the backlog of near-foreclosures and get the real estate market back on track. Initially, the new law required lenders to respond to a short sale offer in 30 days and it said that all approved short sales in Illinois must include a release of deficiency. California passed a law that prohibited deficiency claims on first and second mortgages not too long ago and I was hoping for a law similar to theirs. But as the law worked its way through the legislature over the past year, the forgiveness of deficiency was amended out of it and the requirement that the lender respond in 30 days was extended to 90 days.
As passed, the law does one thing: Requires the lender to respond to a short sale offer in 90 days. That’s it. And there’s no penalty if the lender doesn’t respond. Basically, the new law does nothing and that’s not good at a time like this when so many homes are way, way underwater.