In good news for homeowners facing foreclosures, in August, the Federal Housing Finance Agency (FHFA) announced new guidelines for mortgage servicers. The agency aims to speed short sales with the change in guidelines.
A short sale occurs when the owner sells a home for less than what is owed on the mortgage. This type of sale requires that the mortgage lender agree to forgive the difference owed.
If a homeowner can demonstrate a hardship such as divorce, disability, the need to relocate more than 50 miles for work, or death of a borrower or co-borrower, lenders can now expedite short sales without any additional endorsement by Fannie Mae or Freddie Mac.
Further, Fannie Mae and Freddie Mac will also waive the right to obtain a judgment against short sale borrowers who have the income or assets to provide cash contributions towards the difference they owe.
Another key change provides special handling for military personnel with “permanent change of station” orders. Relocated military members automatically qualify for a short sale option, even if they are not behind on their mortgages. In addition, they are not required to cover the difference between the sale price of their home and the outstanding balance on their loans.
The revamped rules also include:
- A more efficient process for handling short sales by borrowers in the most dire situations
- Merging existing short sale programs into one process
- Freddie Mac and Fannie Mae will offer up to $6,000 to second-lien holders in order to speed up short sales. In the past, second-lien holders were able to slow down short sales by asking for higher bids.
These new guidelines are a start toward faster processing of short sale transactions.
Source: cbsnews.com, “Feds move to speed home “short sales,” Aug. 21, 2012