Fannie & Freddie Speed Up Short Sale Process

Fannie Mae and Freddie Mac are adopting new guidlines to streamline the short sale process. The new guidelines, effective June 15th, would requires servicers of mortgages backed by Freddie and Fannie to review and respond to short sale requests within 30 days of receipt of a buyer's offer. The guidelines also mandate weekly status updates to the borrower if the short sale remains under review after 30 days.

By the year's end Fannie and Freddie also will announce other changes to the short sale process, including borrower eligibility evaluation, simplified documents and payment to subordinate lienholders. Servicers will also be required to make and inform borrowers of final decisions within 60 days of receipt of an offer. As you may recall in my previous post on Mortgage Modification, I discussed how Fannie and Freddie were refusing to endorse principal reductions, which would more accurately align mortgages to fair market value, resulting in fewer underwater mortgages.

If you are not familiar with short sales, they are transactions where the lender agrees to accept less than the amount owed on the mortgage. It is designed to get the borrower out of financial trouble whithout going through the lengthy legal foreclosure process. However, it is important to note that a short sale does affect the seller's credit score, possibly as much as a foreclosure would. On average foreclosures are currently taking 306 days, compared to 113 days in 2006. The delays often result in loss of the sale. For more information regarding short sales and other foreclosure alternatives in Kansas City please contact me, Kansas City bankruptcy attorney Cary Smalley of The Smalley Law Firm, at (913) 601-3549 or http://www.thesmalleylawfirm.com for a free initial consultation.