FHFA Announces New Standard Short Sale Guidelines 8/21/2012

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac;Programs Aligned to Expedite Assistance to Borrowers.

Fannie Mae and Freddie Mac will waive the right to pursue deficiencyjudgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissorynotes: 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 andexecute 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 last minute 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 reviewand 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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Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
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