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Posted: 09/21/2012 6:05 pm EDT Updated: 09/22/2012 9:57 am EDT


New Short-Sale Guidelines

Realtors applaud streamlined short-sale guidelines
Reduced paperwork, incentives to second-lien holders may boost sales
Inman News®

Short sale image via Shutterstock.
Short sales, already on the rise this year, are expected to get an additional boost from a move by federal regulators who oversee Fannie Mae and Freddie Mac to streamline paperwork and offer up to $6,000 to second-lien holders who can derail the process.

Fannie Mae and Freddie Mac will offer up to $6,000 to second-lien holders to expedite a short sale, the Federal Housing Finance Agency announced this week, and require reduced or no documentation from borrowers who have missed several loan payments, have low credit scores, or have serious financial hardship.

For borrowers who are still current on their mortgages, loan servicers will have more leeway to process short sales for homeowners facing hardships like a death in the family, divorce, disability, employment transfer or relocation.

Military personnel being relocated will be eligible for short sales automatically, even if they are current on their existing mortgages, and will be exempt from deficiency judgments.

Other homeowners who have sufficient income or assets will be asked to contribute funds to cover part or all the shortfall between the outstanding loan balance and the sales price on their homes.

The National Association of Realtors welcomed the new guidelines, which take effect Nov. 1. NAR said it worked closely on the guidelines with FHFA, Fannie Mae and Freddie Mac.

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“NAR believes that improving short-sale eligibility will allow more families to avoid foreclosure and reduce the negative impact foreclosures have on families and communities,” the trade association said in a statement. “Short sales also help stabilize home values and neighborhoods by keeping homes occupied, which benefits the housing market and aids in the recovery.”

Guy Cecala, publisher of the trade publication Inside Mortgage Finance, told the Wall Street Journal that $6,000 may not be enough of an incentive for some second-lien holders to agree to sign off on a short sale.

But short sales are already on the upswing, the Journal noted, citing statistics from loan data aggregator CoreLogic that such transactions made up 8.8 percent of home sales in May, compared with 7.6 percent at the same time a year ago and 6.5 percent during all of 2010.

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