FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac; Programs Aligned to Expedite Assistance to Borrowers
The streamlined program rules will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale in Baltimore County, Harford County, Anne Arundel County, Montgomery County, Howard County, Baltimore City and surrounding areas that Robert B. McArtor with RE/MAX Components services.
The NEW Guidelines go into effect November 1, 2012. They 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 have an eligible hardship. 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:
1 - 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.
2. - 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.
3. - 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.
4. - 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.
5. - 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.
6. - Provide servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending: The new gudance 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.
7. - 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.
FHFA announce guidelines in June that extablish strict timelines for servicers considering short sales. Servicers are required to review and respond to short sales within 30 days of receipt of a short sale offer; they must provide weekly status updates to the borrower if the offer is still under review after 30 days, and they must make and communicate final decisions to the borrower within 60 days of receipt of the offer and complete borrower response package. These borrowers will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after a short sale.
FHFA encourages homeowners to reach out early to their lender or servicer if they face any hardship affecting their ability to pay their mortgage. The Nelson Group, LLC. with RE/MAX Components has a 98% success rate with starting, listing and closing short sales through-out Maryland.