The government-sponsored enterprises have implemented consistent guidelines for short sale procedures and those efforts are expected to expand to include additional loss mitigation efforts.
Speaking at the National Mortgage News Best Practices in Loss Mitigation Conference in Dallas Friday, Mert Kayan, Fannie Mae director of loss mitigation strategies and products, said he expects the Federal Housing Finance Agency (FHFA) to instruct Freddie Mac to adopt a deed-for-lease loss mitigation option that will mirror a policy already in place at Fannie.
Fannie and Freddie are developing enhanced and aligned strategies for facilitating short sales and deeds-in-lieu of foreclosure and deeds-for-lease in order to help more homeowners avoid foreclosure, Kayan said. Those efforts will come in stages, with the first—the GSEs’ alignment on short sale procedures—already taken effect in June 2012.
That includes deed-for-lease. Like a deed-in-lieu of foreclosure, deed-for-lease lets a borrower sign over title to the home to avoid foreclosure. But the borrower is allowed to stay in the home as a rental tenant. “Going forward, both Freddie and FHFA see the value of it and it’s part of the discussions,” Kayan said.
The aligned short sale policies require servicers to quickly respond to short sale offers, and it streamlines the amount of documentation required from borrowers. “This was put in place to have a lean and fast decisioning process,” he said. “This is not just a baseline; this is the borrower response package.”
The new alignment timelines include the requirement that servicers review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer. In extreme cases, servicers can have up to 60 calendar days to respond, but Kayan made it clear that those cases are the exception to the norm.
“The norm should be to operate well within the first threshold,” he said. “This is just to allow for exceptions.”
The GSEs also implemented a new forbearance program for unemployed borrowers and new policies for military servicemembers that receive Permanent Change of Station orders. Military borrowers who receive PCS orders are now eligible to sell their homes in a short sale, even if they are current on their mortgage. “Servicemembers will not have to be pushed into delinquency if they have a permanent change of station.”
As new policies are developed, Kayan said the GSEs and FHFA will begin explaining the new policies as soon as possible.
“Our goal is not to wait until the announcement goes out, but to reveal the FHFA’s directive to the industry, pull the servicers into the discussion and implement as quickly as possible,” he said.