New Federal Short Sale Guidelines Now in Effect — Faster New Jersey Short Sales Coming
Although short sales have been on the rise, the notoriously long and uncertain nature of the process has led to a high failure rate. Through new guidelines designed to set clear expectations, federal regulators hope to expedite the process and increase successful transactions. New Standards for Short Sales The Federal Housing Finance Agency’s new policy will require mortgage servicers to review and respond to short sale requests within 30 calendar days. If the short sale is still under review after that time, the servicer must provide the borrower with weekly status updates. However, a final decision must be made within 60 calendar days.
According to new guidelines in effect June 15th, servicers of Fannie Mae and Freddie Mac loans will be required to follow these new timelines for short sale requests. The new timelines for communication and decision making will apply to all mortgages controlled by Fannie Mae and Freddie Mac—representing nearly 60 percent of the U.S. mortgage market. Per the new rules, for HAFA short sales the clock begins once the borrower presents a complete short sale approval package.
These changes are only the beginning of a broader effort to address lingering problems and help more homeowners avoid foreclosure. By the end of the year, the Federal Housing Finance Agency plans to implement further improvements, including steps to simplify documentation, improve property valuation, and mitigate fraud.
Will the Timelines Help?
A short sale occurs when a lender agrees to sell the property for less than the outstanding mortgage. When a homeowner requests a short sale, servicers have to get consent from a potentially long list of stakeholders, including investors, mortgage insurance companies, and sometimes a second lien-holder. Because of these complications and no imposed deadlines, transactions often fall through as borrowers and potential buyers are left in limbo for an indefinite period of time.
With more frequent communication and standardized deadlines, these changes should help to ease the uncertainty of the process and result in more successful short sales. However, it is vital that these new guidelines are actually followed. While a two-month turnaround on a short sale is not unheard of, that efficiency is certainly an exception more than a rule. The new guidelines will only be helpful if lenders and servicers enact the necessary changes to meet the requirements. Special incentives are built in to encourage lenders and servicers to meet the new timeline. In addition, there are penalties for failing to act timely. Having professional help ensuring these requirements are followed is crucial.
Find Out More
Short sales can be beneficial to all parties involved—saving the lender money, helping the borrower recover faster, and keeping communities stable. But even with the new policies and improvements, the short sale process can be daunting. Our experienced Burlington County short sale attorney can help you determine your best options and navigate the ever-changing market.
Contact our office today to find out if a short sale can be your path to a fresh start.