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On April 17, the Federal Housing Finance Agency (FHFA) announced a new directive as part of FHFA’s continued servicing alignment initiative that directs Fannie Mae and Freddie Mac to align their guidelines for servicing delinquent mortgages they own or guarantee.
The new directive requires that servicers of Fannie and Freddie loans:
• Review and respond to borrower requests for short sales within 30 days after receipt of a short sale offer and a complete borrower request.
• If the review is still under way after 30 days, give the borrower weekly status updates. (This allows more time where necessary, such as where subordinate lenders and/or mortgage insurance is involved.)
• Advise the borrower of the final decision within 60 days after receipt of a short sale offer and a complete borrower request.
The new timelines apply both to HAFA loans and to other short sales approved by Fannie Mae and Freddie Mac. Additional enhancements are planned by the end of 2012 addressing borrower eligibility, simplifying documentation, valuing property, payments to subordinate lien holders, and mortgage insurance.
REALTOR® officials at the national, state and local level applaud the move by FHFA to streamline the short sale process. Faster response times will help thousands of distressed homeowners, according to Suzanne Yost, president of the Silicon Valley Association of REALTORS®.
“Short sale transactions are more complicated than regular transactions and they have taken so much time that many prospective buyers have walked away from short sales,” said Yost. “The FHFA’s move to streamline the short sale process is a critical step toward a full housing market recovery.”
In another move to protect struggling California homeowners, the California Association of REALTORS® (C.A.R.) is sponsoring a bill so homeowners who face losing their home and have negotiated a short sale in good faith with their lender or servicer are not forced to go through foreclosure.
Assembly Bill 1745 (Torres, D-Pomona) prevents lenders or servicers that have agreed to a “short sale” from foreclosing on a home. For any number of reasons (e.g., sickness, job loss, etc.), a homeowner may be unable to continue making his or her monthly mortgage payment. Rather than go through a lengthy and stressful foreclosure process, the homeowner will attempt to negotiate a “short” sale with the lender in which the lender agrees to accept less than the amount owed by the homeowner.
Foreclosures and short sales are usually handled by two different departments within banks. Unfortunately, these two departments often do not communicate with each other, which can frequently result in a homeowner being foreclosed upon, despite having previously negotiated a short sale with the same bank.
AB 1745 will likely result in banks implementing a dual tracking system to prevent foreclosing upon homeowners with whom they have already negotiated a short sale. The measure is scheduled for hearing on Monday, April 30 by the Assembly Banking and Finance Committee.
Silicon Valley Association of REALTORS® says ... 