Important new short sale rules

Fannie Mae and Freddie Mac will implement new short sale guidelines starting November 1, 2012. These new guidelines are intended to make the short sale approval process easier for eligible borrowers.

Here are some of the changes:

  1. Relief to those underwater borrowers who need to relocate more than 50 miles for a job.
  2. Borrowers who have a credit score lower than 620 and are 90 days or more delinquent will no longer be required to provide documentation for their hardship.
  3. The GSEs will also waive their right to pursue deficiency judgments. Borrowers with sufficient income or assets can make cash contributions or sign promissory notes instead.
  4. Second lien holders’ change: to prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000.
  5. Enable servicers to approve a short sale for borrowers who are not in default but face certain hardships including the death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.
  6. Provisions created for military personnel with Permanent Change of Station (PCS) orders. Service members who are required to relocate will automatically be eligible for short sales even if they are current. They will not be obligated to contribute funds to pay for the remaining deficiency.

Short sales are important in preventing foreclosures and stabilizing communities and the real estate market.

These changes to the short sales process will try to minimize foreclosures and to help the national housing market to a faster recovery.

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