View Mobile Site

Ask the Expert

Signal Photos


Short sale rules aid borrowers

Posted: September 13, 2012 2:00 a.m.
Updated: September 13, 2012 2:00 a.m.

New rules that take effect Nov. 1 align guidelines for Fannie Mae and Freddie Mac short sales, which should allow lenders and servicers to quickly and more easily qualify borrowers for a short sale.

Realtors nationwide hailed the guidelines issued by the Federal Housing Finance Agency as a needed step toward expanding eligibility criteria and streamlining the short sale process, which accounts for 23.9 percent of all sales in the Santa Clarita Valley.

The new guidelines will enable lenders to quickly and easily qualify homeowners for a short sale who are current on their mortgage payments yet suffer from specific hardships, such as job relocation, increase in housing expenses, unemployment or disability.

The FHFA guidelines will also consolidate existing short sales programs into a single uniform process and, hopefully, provide lenders and homeowners clarity on processing a short sale when a foreclosure sale is pending.

I know that when a family is absolutely unable to keep their home, a short sale, where a home is sold for less than what is owed, is often one of the best options for homeowners hoping to avoid foreclosure.

Realtors appreciate FHFA’s efforts to increase the number of short sale approvals, which limit the losses incurred by homeowners, lenders, the federal government and taxpayers.

The National and California Associations of Realtors worked closely with FHFA, Fannie Mae and Freddie Mac to create the new guidelines. They have long advocated improving the short sale process to provide more distressed homeowners with alternatives to foreclosure.

Realtors believe that improving short sale eligibility will allow more families to avoid foreclosure and reduce the negative impact foreclosures have on families and communities. Short sales also help stabilize home values and neighborhoods by keeping homes occupied, which benefits the housing market and aids in the recovery.

Some of the specific changes effective Nov. 1 include:

Eliminating current Fannie Mae and Freddie Mac short sale programs and creating a single standard short sale process for both entities. Fannie and Freddie Home Affordable Foreclosure Alternative programs will expire at the end of the year.

Enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales without waiting for an approval from Fannie Mae or Freddie Mac

Offer special treatment for military personnel with Permanent Change of Station orders.

Standardize and clarify foreclosure suspensions on a property with an approved short sale.

Possibly pay borrowers up to $3,000 in relocation assistance.

Fannie Mae and Freddie Mac may offer up to $6,000 to subordinate lien holders to expedite a short sale.

Additionally, FHFA clarified that a borrower experiencing a hardship must wait at least two years before becoming eligible for a new Fannie Mae or Freddie Mac loan.

These changes follow FHFA’s announcement in June that established strict timelines for servicers to respond to short sales within 30 days of receipt of a short sale offer, provide weekly status updates to the borrower, and communicate a final decision to the borrower within 60 days of receipt of the offer.

For further details and links to Fannie and Freddie info, go on-line to:

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.


Most Popular Articles

There are no articles at this time.
Commenting not available.
Commenting is not available.


Powered By
Morris Technology
Please wait ...