Fannie Mae Announces New Guidelines: Streamline Short Sale Processes to Prevent Foreclosures

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Fannie Mae Announces New Guidelines: Streamline Short Sale Processes to Prevent Foreclosures

Fannie Mae Announces New Guidelines: Streamline Short Sale Processes to Prevent Foreclosures

Fannie Mae-

Fannie Mae (FNMA/OTC) announced that it will implement new short sale guidelines for servicers to follow as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative.  The new guidelines streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale and set standard payments for subordinate lien holders.  In addition, all servicers will have the authority to approve and complete short sales that conform to the requirements without receiving individual approval from Fannie Mae.

Under the new guidelines, servicers will be permitted to approve a short sale for borrowers who have certain hardships but have not yet gone into default.  Those hardships include the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.  In addition, Fannie Mae is significantly reducing the documentation required to complete a short sale, including requiring no documentation of a borrower’s hardship 90 days or more delinquent and have a credit score lower than 620.  This will remove barriers for those homeowners who are most in danger of foreclosure and increase servicer efficiency in completing a short sale.

Fannie Mae will also limit subordinate-lien payments to $6,000.  Previously, subordinate lien holders often attempted to negotiate higher payments.  The servicer will be able to offer the maximum payment of $6,000 in order to facilitate the transaction. By setting a standard payout amount and a limit for every transaction, Fannie Mae is removing the guess work and standardizing the transaction to help accelerate the short sale process. 

Fannie Mae has taken a number of steps to make the short sale process more efficient, including implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets work out challenges in individual short sales, requiring servicers to complete short sale evaluations within 60 days and making military families who receive Permanent Change of Station orders eligible for a short sale.  Fannie Mae completed 38,717 short sales through the first six months of 2012 and 70,025 in full year 2011.

[FANNIE MAE]

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