Because delays in approving short sales have caused many homeowners to go into foreclosure, a federal agency has recently streamlined the short sale process for Fannie Mae and Freddie Mac loans. This means that if you have a Fannie Mae or Freddie Mac loan, you have a better chance of getting a short sale approved before your home goes into foreclosure.
(To learn more about short sales work, see Nolo's Short Sales topic area.)
A short sale is when you sell your home for less than the total debt balance remaining on your mortgage and the proceeds of the sale pay off a portion of the mortgage balance. In many cases, short sales fail because the loan servicer takes a long time to decide whether or not to accept the deal. Sellers and buyers often get frustrated and choose to give up on the process. As a result, a home may be foreclosed upon even though there was a possible short sale in the works.
To enable loan servicers to more rapidly qualify eligible borrowers for a short sale, the Federal Housing Finance Agency (FHFA) recently directed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to streamline the short sale process so that homeowners whose loans are backed by these enterprises can avoid foreclosure.
As of June 2012, servicers must abide by strict timelines when considering a short sale offer. Under these guidelines, the mortgage servicer must:
Moreover, additional guidelines effective November 1, 2012, include:
One thing to keep in mind is that if you complete a short sale under this process, you will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after the short sale.
On June 5, 2013, Fannie Mae announced a new tool to help real estate professionals successfully close short sales. Agents are to register accepted short sale offers with Fannie Mae at their website Homepathforshortsales.com. Agents are asked to provide short sale offer information, such as the property address, MLS listing information, offer details, and subordinate lien information, which will provide greater transparency in the process and allow Fannie Mae to proactively work with the mortgage servicer to finalize the sale.
The new guidelines apply only to loans backed by Fannie Mae and Freddie Mac. To determine if either Fannie Mae or Freddie Mac owns your loan, go to www.fanniemae.com/loanlookup (or call 1-800-7Fannie) or www.freddiemac.com/mymortgage (or call 1-800-Freddie). Military servicemembers can check the Fannie Mae or Freddie Mac websites or can call the hotline for military homeowners at 1-877-MIL-4566 or 1-800-Freddie.