On August 21, 2012, the Federal Housing
Finance Agency (FHFA) announced
that
Fannie Mae and Freddie
Mac are issuing guidelines to their mortgage servicers that
will consolidate existing short sales programs into one standard short sale program in an effort to streamline program rules that will enable lenders and servicers to quickly and easily qualify
eligible borrowers
for a short sale.
The new guidelines, will go into effect November 1, 2012 and will permit a homeowner with a Fannie Mae or
Freddie Mac mortgage to sell their
home in a short
sale even if
they are current on their mortgage if
they can demonstrate an eligible hardship. Servicers
will be able to expedite processing
a short sale for borrowers with hardships
such as death of a borrower
or co-borrower,
divorce, disability,
or relocation for a job without
any
additional approval from Fannie Mae or Freddie
Mac.
“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. “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 new guidelines:
• Offer a
streamlined short sale approach
for borrowers most in need: To move short sales
forward expeditiously for those borrowers who have missed
several
mortgage payments,
have low credit
scores, and
serious
financial hardships the
documentation required to demonstrate need
has been reduced or
eliminated.
• Enable servicers to quickly and easily
qualify
certain borrowers who are current
on
their mortgages for
short sales: Common reasons for
borrower
hardship are death, divorce,
disability,
and distant employment
transfer or relocation. With the program
changes, servicers will be permitted
to
process
short sales
for borrowers
with
these hardships
without any additional approval from
Fannie Mae or Freddie
Mac, even if
the borrowers
are current
on
their mortgage payments.
Borrowers will now qualify for a short sale if
they need to relocate more than 50 miles from their home for a job transfer or new
employment opportunity.
• Fannie
Mae and Freddie Mac will
waive the
right to pursue
deficiency judgments in exchange for
a financial contribution when a
borrower
has sufficient income or
assets to make
cash contributions or
sign
promissory
notes:
Servicers will evaluate borrowers
for
additional capacity to cover the shortfall
between the outstanding loan balance
and the property sales
price as part of
approving the short sale.
• Offer
special treatment for
military personnel with Permanent Change
of Station (PCS) orders: Service members who are being relocated will be automatically eligible for short sales, even if they are current on their existing mortgages, and will be under
no
obligation to contribute funds
to
cover the shortfall between the outstanding loan balance and the sales price on their homes.
• Consolidate existing short
sales programs into a
single uniform program: Servicers
will have more clear and
consistent
guidelines making it easier
to
process
and execute short
sales.
• Provide servicers and borrowers clarity on processing a
short sale
when a foreclosure sale
is
pending: The new
guidance will clarify when a borrower must
submit
their application and a sales
offer
to
be considered
for
a short sale, so that last- minute communications
and negotiations are handled
in a uniform and
fair
manner.
• Fannie
Mae and Freddie Mac
will
offer
up to $6,000 to second lien holders to expedite a short sale. Previously, second
lien holders could slow down the short sale process by negotiating
for
higher amounts.
Contact us
if you are involved in, or considering, any short sale transaction.
