Starting November
1, 2012, Fannie Mae and Freddie Mac will implement new
short sale guidelines to make the approval process
easier for eligible borrowers.
“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.
In April, the GSEs also announced they were setting
requirements to have a decision on a short sale offer made within 30-60
days.
Source: DSnews.com
Reported by Esther Cho
