Pam Marron Home Lending

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

FHFA November 1st, 2012 Short Sale Guidelines (complete news release)

Please also see the attached FHFA Fact Sheet that specifies hardships and other information.

FEDERAL HOUSING FINANCE AGENCY NEWS RELEASE

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac;

Programs Aligned to Expedite Assistance to Borrowers

Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that

Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that

will align and consolidate existing short sales programs into one standard short sale program.

The streamlined program rules will enable lenders and servicers to quickly and easily qualify

eligible borrowers for a short sale.

The 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.

“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 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

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.

These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets

and financial institutions.

FHFA Fact Sheet