In a recent letter sent out by FAHA, FNMA and Freddie Mac Guidelines for Short Sales has been streamlined.
For Immediate Release Contact: Corinne Russell (202) 649-3032
August 21, 2012 Stefanie Johnson (202) 649-3030
FHFA Announces New Standard Short Sale Guidelines forÂ
Fannie Mae and Freddie Mac;
Programs Aligned to Expedite Assistance to Borrowers
Washington, DC â€“ TheÂ Federal Housing Finance Agency (FHFA)Â today announced thatÂ
Fannie Mae and Freddie Mac are issuingÂ new, clear guidelinesÂ to their mortgage servicers thatÂ
will align and consolidateÂ existing short sales programs into one standard short sale program.Â
The streamlined program rules will enable lenders and servicers to quickly and easily qualifyÂ
eligible borrowers for a short sale.Â
The new guidelines, which go into effect Nov. 1, 2012, will permit a homeowner with aÂ FannieÂ
Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on theirÂ
mortgage if they have an eligible hardship.Â Servicers will be able to expedite processing a shortÂ
sale for borrowers with hardships such as death of a borrower or co-borrower, divorce,Â
disability, or relocation for a job without any additional approval from Fannie Mae or FreddieÂ
â€œThese new guidelines demonstrate FHFAâ€™s and Fannie Maeâ€™s and Freddie Macâ€™s commitmentÂ
to enhancing and streamlining processes to avoid foreclosure and stabilize communities,â€ saidÂ
FHFA Acting Director Edward J. DeMarco. â€œThe new standard short sale program will alsoÂ
provide relief to those underwater borrowers who need to relocate more than 50 miles for aÂ
The new guidelines:
â€¢ Offer a streamlined short sale approach for borrowers most in need: ToÂ
moveÂ short salesÂ forward expeditiously for thoseÂ borrowers who have missed severalÂ
mortgage payments, haveÂ low credit scores, andÂ serious financial hardshipsÂ theÂ
documentation required to demonstrate need has been reduced or eliminated.
â€¢ Enable servicers to quickly and easily qualify certain borrowers who areÂ
current on their mortgages for short sales: CommonÂ reasons for borrowerÂ
hardship are death, divorce, disability, and distant employment transfer or relocation.
With the program changes, servicers will be permitted to process short sales forÂ
borrowers with these hardshipsÂ without any additional approval from Fannie Mae orÂ
Freddie Mac, even if the borrowers are current on their mortgage payments.Â BorrowersÂ
will now qualify for a short sale if they need to relocate more than 50 miles from theirÂ
home for a job transfer or new employment opportunity.
â€¢ Fannie Mae and Freddie Mac will waive theÂ right to pursue deficiencyÂ
judgments in exchange for a financial contributionÂ when a borrower hasÂ
sufficient income or assets to make cash contributions or sign promissoryÂ
notes: Servicers will evaluate borrowers for additional capacity to cover the shortfallÂ
between the outstanding loan balance and the property sales price as part of approvingÂ
the short sale.
â€¢ Offer special treatment for military personnel withÂ Permanent Change ofÂ
Station (PCS) orders: Service members who are being relocated will beÂ
automatically eligible for short sales, even if they are current on their existingÂ
mortgages, and will beÂ under no obligation to contribute funds to cover the shortfallÂ
between the outstanding loan balance and the sales price on their homes.
â€¢ Consolidate existing short sales programs into a single uniform program:
Servicers will have more clear and consistent guidelines making it easier to process andÂ
execute short sales.Â
â€¢ Provide servicers and borrowers clarity on processing a short sale when aÂ
foreclosure sale is pending: The new guidance will clarify when a borrower mustÂ
submit their application and a sales offer to be considered for a short sale, so that lastminute communications and negotiations are handled in a uniform and fair manner.
â€¢Â Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holdersÂ
to expedite a short sale. Previously, second lien holders could slow down the shortÂ
sale process by negotiating for higher amounts.
This alignment comes as part of a broader FHFA effort, the Servicing Alignment Initiative, toÂ
streamline Fannie Mae and Freddie Mac programs for short sales and other foreclosureÂ
alternatives to assist struggling homeowners. FHFA announced guidelines in June thatÂ
establish strict timelines for servicers considering short sales. Servicers are required to reviewÂ
and respond to short sales within 30 days of receipt of a short sale offer; they must provideÂ
weekly status updates to the borrower if the offer is still under review after 30 days, and theyÂ
must make and communicate final decisions to the borrower within 60 days of receipt of theÂ
offer and complete borrower response package. These borrowers will not be eligible for a newÂ
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 anyÂ
hardship affecting their ability to pay their mortgage.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.Â
These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage marketsÂ
and financial institutions.
The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to align existing short sales programs intoÂ
one standard short sale program and issue clear guidelines to mortgage servicers. With these changes, Fannie Mae andÂ
Freddie Mac will allow homeowners with eligible hardships to sell their home in a short sale even if they are current onÂ
their loans. FHFA, Fannie Mae and Freddie Mac are making these changes to help more homeowners avoid foreclosure,Â
keep homes occupied and help maintain stable communities. The streamlined program rules will enable lenders andÂ
servicers to quickly and easily qualify eligible borrowers for a short sale.
The programs being aligned are: Fannie Maeâ€™s Home Affordable Foreclosure Alternative (HAFA) and proprietary short saleÂ
programs, and Freddie Macâ€™s HAFA and proprietary short sale programs. The current Fannie Mae and Freddie Mac HAFAÂ
programs are modeled on the U.S. Department of Treasuryâ€™s Home Affordable Foreclosure Alternative program, but withÂ
this guidance, there will be one program offered by Fannie Mae and Freddie Mac â€“ the Standard Short Sale/HAFA II.Â
Guidance will be issued by Freddie Mac August 21 and by Fannie Mae August 22 and will be effective by November 1.Â
â€¢ TheÂ existing mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac.Â
â€¢ TheÂ person must have a demonstrated hardshipÂ which includes:Â
â€¢Â Death of a borrower or death of the primary or secondary wage earner in the household
â€¢Â Long-term disability
â€¢Â Distant employment transfer/relocation (more than 50 miles one way)
â€¢Â Increased housing expenses
â€¢ Disaster (natural or man-made)
â€¢ Business failure
FEDERAL HOUSING FINANCE AGENCY
FHFA ANNOUNCES NEW SHORT SALE GUIDELINES:Â
PROGRAMS ALIGNED TO EXPEDITE ASSISTANCE TO BORROWERS
HIGHLIGHTS - THE NEW GUIDELINES:Â
â€¢ Offer a streamlined short sale approach for borrowersÂ
most in need.Â
â€¢ Enable servicers to quickly and easily qualify certainÂ
borrowers who are current on their mortgages forÂ
â€¢ Fannie Mae and Freddie Mac will waive the rightÂ
to pursue deï¬ ciency judgments in exchange for aÂ
ï¬ nancial contribution when a borrower has sufï¬ cientÂ
income or assets to make cash contributions or signÂ
â€¢ Offer special treatment for military personnel withÂ
Permanent Change of Station (PCS) orders.
â€¢ Consolidate existing short sales programs into a singleÂ
â€¢ Provide servicers and borrowers clarity on processingÂ
a short sale when a foreclosure sale is pending.
â€¢ Fannie Mae and Freddie Mac will offer up to $6,000 toÂ
second lien holders to expedite a short sale.
ELIGIBILITY REQUIREMENTS (CONTINUED)Â
â€¢ Borrowers that need to relocate more than 50 miles one way for a job, including service members with PermanentÂ
Change of Station Orders, can be current or delinquent on their mortgage to apply for a short sale.Â
â€¢ Borrowers who have the capacity to contribute to shortages will be asked to make a reasonable contribution towardÂ
the shortfall. However, service members with Permanent Change of Station Orders will not be asked for a contributionÂ
towards the shortage for properties purchased on or before June 30, 2012.
â€¢ Borrowers will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after aÂ
RESOURCES FOR MILITARY HOMEOWNERS
Service members can check Fannie Mae or Freddie Mac websites to see if their loans are held by them or they can callÂ
hotlines for military homeowners at 1-877-MIL-4566 or 1-800- FREDDIE.Â
FHFA announcement of 6/21/12: FHFA Announces Short Sale Assistance for Military Homeowners with Fannie Mae orÂ
Freddie Mac Loans (http://www.fhfa.gov/webï¬ les/24026/CFPBFinalwFS.pdf)
IS YOUR MORTGAGE OWNED OR GUARANTEED BY FANNIE MAE OR FREDDIE MAC?
Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to:
â€¢ http://www.FannieMae.com/loanlookup or calling 800-7Fannie (8 am to 8 pm ET)
â€¢ https://www.FreddieMac.com/corporate/ or 800-Freddie (8 am to 8 pm ET)
FHFA ENCOURAGES HOMEOWNERS TO REACH OUT EARLY TO THEIR LENDER OR SERVICER IF THEY FACE ANY
HARDSHIP AFFECTING THEIR ABILITY TO PAY THEIR MORTGAGE.Â
What is a short sale?
A Short Sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on yourÂ
mortgage. If your mortgage company agrees to a short sale, you can sell your home and pay off all (or a portion of) yourÂ
mortgage balance with the proceeds.