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New Short Sale Guidelines Coming Soon

2011 and 2012 may well go down in history as “the years of the short sale.” Through the first six months of 2012, Fannie Mae had completed 38,717 short sales, and in 2011 it completed 70,025 total.

If you are in a situation where you owe more on your mortgage than your home is currently worth, chances are you have at least thought about short selling your house.

Recently the Federal Housing Finance Agency announced that both Fannie Mae and Freddie Mac are issuing new guidelines for mortgage servicers that will essentially consolidate all short sale programs into one streamlined program.

These updated short sale program rules will allow lenders to qualify someone for a short sale, and homeowners will more easily be able to tell if they are eligible for a short sale.

New short sale guideline highlights

Under the new guidelines going into effect Nov. 1:

  • Homeowners with a mortgage backed by Fannie Mae or Freddie Mac will be able to do a short sale even if they are current on their mortgage if they have an eligible hardship such as
    the death of a borrower or co-borrower, divorce or legal separation, illness or disability, or a distant employment transfer.
  • Homeowners will be able to make a financial contribution at closing in exchange for the lender not pursuing them for a deficiency judgment later (assuming the homeowner has sufficient income and/or assets).
  • Military personnel who are being relocated will be automatically eligible for a short sale 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.
  • Subordinate-lien payments will be limited to $6,000. Previously lenders would often attempt to negotiate a higher payment from the homeowner.
  • In certain circumstances, homeowners will be eligible to receive up to $3,000 in relocation assistance.

New guidelines for lenders

The FHFA also recently announced that lenders:

  • Must respond to short sales within 30 days of receipt of the short sale offer.
  • Must provide weekly updates to the borrower.
  • Must communicate a final decision to the borrower within 60 days of receipt of the offer.

Combined these new short sale guidelines seem to indicate that homeowners who are faced with the difficulty of short selling a home will have a smoother transaction than ever before.

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Justin McHood is America’s Mortgage Commentator and lives in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, and LinkedIn. He is happy to answer any mortgage-related questions that you may have.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.