Fannie Mae and Freddie Mac on Tuesday issued new guidelines for short sales, allowing their servicers to complete many transactions without seeking prior approval from the agencies.
The new guidelines, which become operative Nov. 1, also streamline documentation requirements, waive deficiencies for borrowers that successfully complete a short sale, and set standard payments for second-lien holders.
The GSE regulator directed the mortgage giants to align their servicing policies. The new short sale guidelines are a result of that effort.
“These new guidelines will open the doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers,” Fannie senior vice president Leslie Peeler said.
Among the changes: the GSEs are authorizing their servicers to approve short sales for borrowers who are not delinquent, but are facing common hardships such as divorce, death in the family, disability and job transfers, as well as a permanent change in station for members of the military.
“These changes will make it clear that servicers have the authority to approve short sales for more borrowers facing the most frequently seen hardships,” said Freddie senior vice president Tracy Mooney.
Fannie noted that it is also “significantly reducing” the documentation needed to complete a short sale for borrowers who are 90 days or more delinquent and have credit scores below 620.
In terms of second liens, Fannie servicers will be able to offer junior-lien holders a maximum payment of up to $6,000 to complete a short sale transaction. “It is vital that servicers, junior-lien holders and mortgage insurers step up to the plate with us” to make the short sale process more efficient, Peeler said.
Some industry officials believe that during the housing crisis short sales have been
