GSEs to Allow Short Sales for Borrowers Who Are Current on Mortgage

by devteam August 22nd, 2012 | Share

The Federal Housing Finance Agencyrn(FHFA) announced today that Freddie Mac and Fannie Mae (the GSEs) are revisingrntheir short sale guidelines and delegating authority to their mortgagernservicers to approve short sales as of November 1.  The new procedures are part of the ServicingrnAlignment Initiative which the Federal Housing Finance Agency has directed thernGSEs to develop.  </p

The streamlined program rules willrnenable lenders and servicers to quickly and easily qualify borrowers, who dornnot have to be delinquent on their mortgages, to qualify for short sales.  As a further step to facilitate speedy sales,rnboth of the GSEs have authorized a payment of up to $6,000 to incentivize secondrnlien holders to allow the short sales to proceed.  </p

Additional changes will make it easierrnfor servicers to process short sales for members of the military who mustrnrelocate due to Permanent Change of Station orders.  In these cases servicers can streamline thernprocess including the elimination ofrnback-end debt-to-income ratios and removes the obligation for borrowers torncontribute funds to cover the shortfall between the sales price and theirrnoutstanding mortgage balance. </p

FHFArnsaid that the new guidelines will move short sales forward expeditiously forrnborrowers who have missed several mortgage payments, have low credit scores andrnserious financial hardships because the documentation required to demonstraternneed has been reduced or eliminated.</p

Servicersrnwill also be able to process short sales for borrowers who are current on theirrnmortgages but are facing sudden hardships such as death, divorce, disability,rnor relocation of more than 50 miles for reasons of employment.  Servicers will be allowed to approve shortrnsales in such circumstances without additional approval from Freddie Mac orrnFannie Mae.</p

Therntwo GSEs will waive the right to pursue a deficiency judgment in exchange forrnthe borrower making a financial contribution to the remaining principal balancernor signing a promissory note to that effect if that borrower has the capacityrnto do so.  </p

Thernchanges will consolidate the existing short sales programs of the GSEs into arnsingle uniform program and provide both servicers and borrowers clarity onrnprocessing requirements when a foreclosure sale is pending.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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