Homeowners facing a job relocation or other hardship will soon be able to qualify for an expedited short sale of their homes, under new federal rules.
Beginning Nov. 1, homeowners with a Fannie Mae or Freddie Mac-backed mortgage facing certain types of hardships will be able to qualify for a short sale, even if they are current on their mortgage payments. The Federal Housing Finance Agency (FHFA) announced the new guidelines last week.
No need to exhaust savings
The rules will allow a short sale to proceed without specific approval from Fannie Mae or Freddie Mac as long as the homeowner has a qualifying hardship. In addition to a new job, qualifying hardships include the death of a borrower, a disability or a divorce, among others.
Such homeowners will be able to qualify for an expedited short sale even if they are not in an immediate financial crisis. Currently, homeowners usually have to exhaust their available financial resources for a short sale to be approved.
"These new guidelines demonstrate FHFA's and Fannie Mae's and Freddie Mac's commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities," said Ed DeMarco, FHFA Acting Director. "The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job."
The new rules also streamline the short sale process for borrowers in serious financial difficulty who have missed several mortgage payments by reducing the need to document their hardship. Borrowers will also be able to avoid future deficiency judgments for the collection of unpaid mortgage debt by entering into a financial settlement with Fannie Mae or Freddie Mac as part of approving the short sale.
Fannie Mae and Freddie Mac will also offer incentives to second lien holders to help expedite short sales.
Lenders will still have last word
It will still be up to the banks or other mortgage servicers handling a loan to decide whether to approve a short sale or not, but they will be required to meet certain deadlines. Servicers will be required to review and acknowledge a short sale application within 30 days of the offer and make a final determination within 60 days.
The new guidelines only apply to conforming mortgages, that is, those backed by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are presently under the authority of the FHFA as a result of being in government conservatorship since the 2008 housing crash.