Fannie Mae has updated its short sale guidelines for servicers as part of the Federal Housing Finance Agency’s Servicing Alignment Initiative.
According to a press release from the agency, the new guidelines streamline documentation requirements, waive deficiencies for borrowers who have completed a short sale and set standard payments for subordinate lien holders.
Additionally, all servicers will be given the authority to approve and complete short sales that conform to the requirements without receiving approval from the GSE.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president in the national servicing organization at Fannie Mae.
Peeler said that the agency wants to help as many homeowners avoid foreclosure as it can. "It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us," she said.
Under the new rule, servicers can approve a short sale for borrowers who have certain hardships but have not yet gone into default. The hardships covered include the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.
Fannie Mae will considerably lessen the documentation needed to complete a short sale such as requiring no documentation on the hardship of a borrower who is 90 days or more delinquent and who has a credit score of less than 620. This will take out some barriers for homeowners who are most at risk of foreclosure. It will also make servicers more efficient in completing short sales.
The GSE will also limit subordinate-lien payments to $6,000. Previously, subordinate lien holders would often try to negotiate higher payments.
It has also taken some steps to make the short sale process more efficient such as implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets work out challenges in individual short sales by requiring servicers to complete short sale evaluations within 60 days.
The GSE is also making military families who receive Permanent Change of Station orders eligible for a short sale.
The agency completed 38,717 short sales throughout 1H12 and 70,025 in full year 2011.