Short Sale Shoppers will see Christmas in November
Fannie Mae and Freddie Mac announce short sale short process forthcoming.
In case you’ve had your head in the sand the last few months, Esther Cho reiterated the big summer news: Starting November 1, 2012, Fannie Mae and Freddie Mac will implement new short sale guidelines to make the approval process easier for eligible borrowers.
She shared that with us last month. This blog is “JIC” - Just In Case - you missed it or didn’t flag it. THIS IS IMPORTANT NEWS! ONCE IN A BLUE MOON NEWS!
One of the greatest impediments of “Short Sales” was the oxymoron title - or person that named it - in that it is anything BUT “Short”. Some have taken well over a year only to be negated by a factor in closing. Or successfully closed. The litany of stories is endless, but the fact is that in November we will have the Beta of new regulations for expediency. An expedient government process. Is that another oxymoron? Or is it just me?
The FHFA (Federal Housing Finance Agency) is saying: “These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA Acting Director Edward J. DeMarco in a statement. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”
The changes are part of the FHFA’s Servicing Alignment Initiative and will require a streamlined approach with documents, leading to a reduction in documentation requirements. For example, borrowers who are 90 days or more delinquent and have a credit score lower than 620 will no longer be required to provide documentation for their hardship.
The GSEs will also waive their right to pursue deficiency judgments. Borrowers with sufficient income or assets can make cash contributions or sign promissory notes instead.
One major barrier that is also being addressed is the issue with second lien holders. To prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000.
The new guidelines will also enable servicers to approve a short sale for borrowers who are not in default but face certain hardships including the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.
In addition, all servicers will have the authority to approve and complete short sales that follow the requirements without first going to the GSEs for approval.
Provisions were also created for military personnel with Permanent Change of Station (PCS) orders. Servicemembers who are required to relocate will automatically be eligible for for short sales even if they are current. They also won’t be obligated to contribute funds to pay for the remaining deficiency.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, SVP, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us.”
Tracy Mooney, SVP of Single-Family Servicing and REO at Freddie Mac, said, “These changes will make it clear that Freddie Mac servicers have the authority to approve short sales for more borrowers facing the most frequently seen hardships. These changes will further empower the industry to minimize foreclosures and help Freddie Mac in its mission to minimize credit losses and fortify a national housing recovery.”
Fannie Mae will send the announcement for the new changes to servicers Wednesday. Freddie Mac sent their announcement Tuesday (8-28-12).
In April, the GSEs also announced they were setting requirements to have a decision on a short sale offer made within 30-60 days.
So if you missed any of this before, now you know. As a buyer, seller or real estate professional, you have another bolt in your quiver, so don't miss the target!
The Phil Leng Team