To: Riskmgmt who wrote (94967 ) 9/25/2012 9:24:03 PM From: Riskmgmt Read Replies (1) | Respond to Game changer?Message 28433718 New rules streamline short sale process The latest efforts by Fannie Mae and Freddie Mac to simplify the short sale process and broaden the pool of eligible homeowners are getting a thumbs-up from the housing industry. Some of the policy changes, which were announced late last month and take effect Nov. 1 , already were happening informally, so formalizing them and spreading the word publicly is expected to benefit struggling homeowners who are underwater on their loans. The Federal Housing Finance Agency guidelines came three weeks after the agency announced that despite support from the White House, strapped borrowers with mortgages backed by Fannie and Freddie would not be allowed principal reductions to help save their homes from foreclosure. The FHFA said it was continuing to take steps to simplify the short sale process, and it had already directed servicers to respond to short sale offers within 30 days of receipt. The changes include giving Fannie and Freddie mortgage servicers the authority to approve short sales even if the borrower is not yet delinquent on mortgage payments. Will it mean that any underwater homeowner who wants to get out from under a mortgage can do so? No. Homeowners will have to prove a hardship like divorce, death of a borrower or co-borrower, long-term or permanent disability or job transfer or new job more than 50 miles from home. Borrowers who meet the eligibility requirements will be able to have their short sale request acted upon directly by the servicer, without any additional sign-off from Fannie or Freddie. Beth Mann, an Orland Park real estate attorney, already has seen some current borrowers get their short sale request approved, so she's happy to see that policy formalized and publicized. "Saying it out loud like that is going to be helpful," Mann said. "I have people call me and they're borrowing money, they're too proud to miss a payment." Military personnel who are transferred to another post will receive special considerations. The FHFA also is reducing some of the documentation required for the most at-risk homeowners and is limiting to $6,000 the payments that can be made to a second-lien holder that approves a short sale — selling a home with the lender's approval for less than the amount owed on the mortgage. Negotiations over that figure typically slowed the decision-making process. Finally, the agency said servicers would waive the right to pursue deficiency judgments in exchange for an agreement that a borrower makes contributions toward the shortfall between the mortgage principal and the sale price. In many cases in Illinois, lenders already waive deficiency judgments. The housing market already has seen quite a spike in short sale activity. For instance, just within Chicago last month, 282 homes were sold through short sale, a 33 percent increase from a year ago. Analysts at Fitch Ratings noted foreclosure alternatives such as short sales are more efficient and cheaper for lenders than repossessing a property through foreclosure. But the analysts also said that while the changes are good news for homeowners, it might take a while for servicers to see the guidelines' real benefits. Any effort to streamline the process is welcome, said Dennis Bordyn, a Downers Grove attorney who represents homeowners and has seen a sizable increase in his client base this year. But the success of the new guidelines, in other words whether they will benefit consumers and the housing market, will depend on whether servicers follow the spirit of the new rules. articles.chicagotribune.com
