As Stockton, Lodi, Manteca, and Tracy Short Sale Specialist Agents, we are posting these new guidelines for the benefit of residents in these communities. These new guidelines, which go into effect Nov. 1, 2012, 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. 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. 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 lastminute 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.
This alignment comes as part of a broader FHFA effort, the Servicing Alignment Initiative, to streamline Fannie Mae and Freddie Mac programs for short sales and other foreclosure
alternatives to assist struggling homeowners. FHFA announced guidelines in June that
establish 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
Link to Fannie Mae guidance available Aug. 22
Link to Freddie Mac guidance available Aug. 21