The Federal Housing Finance Agency (FHFA) is directing Fannie Mae and Freddie Mac to streamline their short sale timelines in order to help more homeowners avoid foreclosure, according to a press release issued by McGeough and Lamacchia, which is a real estate brokerage specializing in short sales.
The firm believes these improvements in communication timelines between servicers and borrowers will significantly improve the short sale process.
In a news release dated April 17, 2012, the FHFA outlines new requirements for short sales including the requirement that mortgage servicers review and respond to requests for short sales within 30 days from receipt of a short sale offer.
In the past, lenders have been slow to responding to short sale offers which has frustrated both home buyers and distressed homeowners. Home buyers will now get a quick response when they make an offer on a short sale home, and distressed homeowners will be able to move out of their homes into more affordable housing sooner and avoid foreclosure.
There’s been a lot of pressure recently for banks to improve response times for short sales. In February of this year, Senators Lisa Murkowski (R-AK), Scott Brown (R-MA), and Sherrod Brown (D-OH) introduced a bill, the "Prompt Notification of Short Sale Act," which requires mortgage lenders to make a prompt decision on whether to allow a short sale at the request of a home buyer. The bill is currently awaiting referral to committee.
These new communication timelines apply to both Home Affordable Foreclosure Alternative (HAFA) short sales and regular short sales. They do not guarantee more HAFA short sale approvals, however. HAFA short sales are available for mortgages that are owned or guaranteed by Fannie Mae and Freddie Mac. McGeough Lamacchia Realty says the problem is Fannie Mae and Freddie Mac have been resistant to approving HAFA short sales. McGeough Lamacchia Realty believes that while the guidelines may not increase HAFA short sale approvals, they are a step in the right direction in making short sales easier and will help more people avoid foreclosure.
Short sales are better than foreclosures for distressed homeowners, banks, and communities. Distressed homeowners can transition from a home they can no longer afford more easily through a short sale. Short sales are better for banks because they yield more revenue for banks than foreclosures. Short sales are also better for communities. The homes stay occupied since they go from homeowner to homeowner, and the average selling price for a short sale home is higher than for a foreclosed home, which helps stabilize the neighborhood’s home values.
According to the new guidelines, loan servicers will now be required to provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days; review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package; make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package.
The new guidelines will go into effect for new short sale evaluations conducted on or after June 15, 2012, but servicers are encouraged to implement these guidelines sooner.