On November 1, 2012, Fannie Mae and Freddie Mac (the “GSEs”) implemented new short sale guidelines designed to facilitate quicker, more flexible short sale transactions by allowing Servicers to approve and complete short sales that follow the GSE approved guideline requirements.
Under the new Standard Short Sale guidelines, borrowers who are not in default but face certain hardships including the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer, described as those who need to relocate more than 50 miles for a job, will qualify for a short sale even if they are current on their mortgage payments, without having to prove further hardship.
However, in the recently issued notices to implement these changes, the GSEs have for the first time specifically mandated that the short sale must be conditioned upon the property NOT being resold within 30 days.
In the past it has been possible to strike this language with approval from the relevant GSE, but the formal adoption of this requirement may introduce additional difficulties in facilitating a short sale through a two-sale relocation program. NEI continues to work closely with the Servicers to minimize any delays or modifications to the home sale process.
Some of the other streamlined short sale guidelines include:
- If the borrower is 90 days or more delinquent and has a credit score less than 620 as of the evaluation date, the Servicer is not required to obtain or review the Borrower Response Package.
- To further streamline the process, Servicers must provide timely responses for purchase offers:
- Acknowledge receipt of the purchase offer within three business days
- Notify the borrower within five business days of receiving the purchase offer if there is outstanding information needed to evaluate the offer
- Respond with a purchase offer decision within 30 days of the purchase offer receipt, but no later than 60 days
- If Servicers cannot provide the borrower with a decision within 30 days, they must provide weekly status updates to the borrower on why the decision is still pending
- To prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000 for release of their liens
One of the goals of these changes is to shorten a process that has taken six to nine months in the past.
NEI will be closely monitoring the impact of these guidelines and provide further updates as they become available.