Short Sale Get Easier


Baton Rouge ~ This week Fannie Mae (FNMA/OTC) announced that it will implement new short sale guidelines for servicers to follow as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative. The new guidelines streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale and set standard payments for subordinate lien holders. In addition, all servicers will have the authority to approve and complete short sales that conform to the requirements without receiving individual approval from Fannie Mae.

“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president, 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. These new guidelines will open doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers.”

Under the new FNME and FMAC guidelines effective November 1, 2012 to streamline short sale processes to prevent foreclosures and help communities stabilize, servicers will be permitted to approve a short sale for borrowers who have certain hardships but have not yet gone into default. Those hardships include: the death of a borrower or co-borrower, divorce or legal separation, Illness or disability or a distant employment transfer to provide relief to those underwater borrowers who need to relocate more than 50 miles for a job. In addition, FNME and FMAC are significantly reducing the documentation required to complete a short sale, including requiring no documentation of a borrower’s hardship 90 days or more delinquent and have a credit score lower than 620. This will remove barriers for those homeowners who are most in danger of foreclosure and increase servicer efficiency in completing a short sale.

FNME and FMAC will also limit subordinate-lien payments to $6,000. Previously, subordinate lien holders often attempted to negotiate higher payments. The servicer will be able to offer the maximum payment of $6,000 in order to facilitate the transaction. By setting a standard payout amount and a limit for every transaction, Fannie Mae and Freddie Mac are removing the guess work and standardizing the transaction to help accelerate the short sale process.

Fannie Mae has taken a number of steps to make the short sale process more efficient, including implementing a Short Sale Assistance Desk to help in targeted markets work out challenges in individual short sales, requiring servicers to complete short sale evaluations within 60 days and making military families who receive Permanent Change of Station orders eligible for a short sale. Fannie Mae completed 38,717 short sales through the first six months of 2012 and 70,025 in full year 2011.

This Servicing Guide Announcement implementing the changes to Freddie Mac and Fannie Mae’s short sale guidelines posted to FHFA Short Sales Fact Final.

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