Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Recent HAFA Changes Bring it and Freddie Mac's "Standard Short Sale" Programs Closer

Seattle Short Sales - Monday, March 17, 2014

Changes to the Home Affordable Foreclosure Alternatives (HAFA) Short Sale Program (HAFA), which took effect on February 1st this year, bring HAFA in line with the other main government short sale program, Freddie Mac’s “Standard Short Sale.”  Freddie’s Standard Short Sale guidelines apply to mortgage loans where the investor is one of the GSE’s: Freddie Mac or Fannie Mae. The HAFA program is for non-GSE mortgage loans (provided that the homeowner meets the HAFA eligibility requirements).

The aim of the HAFA changes is to make the whole short sale process faster and easier, by reducing the amount of paperwork and by providing guidelines for timing. The recent changes to HAFA are outlined in HAFA Supplemental Directive 12-07.  Key changes to HAFA are:

  • A Short Sale Agreement (SSA), signed and returned by the borrower, is no longer required. It is replaced by a Short Sale Notice (SSN), which does not require the borrower’s signature.
  • The Request for Approval of Short Sale (RASS) and Alternative Request for Approval of Short Sale (ARASS) are also eliminated, and are replaced by the Acknowledgement of Request of Short Sale (ARSS), which no longer requires the borrower’s signature.
  • In most cases, servicers are required to make a decision on the borrower’s HAFA request within 30 days of receiving all required documents.
  • Treasury now requires both the seller and the purchaser to sign an arm’s-length transaction agreement, and an affidavit that affirms that no money is being exchanged that does not appear on the HUD-1 form.
  • The property may not be resold at all for 30 days after closing of the HAFA short sale, and it may not be resold for more than 120% of the short sale purchase price for 90 days after the HAFA short sale.

The changes over the past six months, both to the Freddie Mac/Fannie Mae short sale guidelines and to  HAFA, mean that the short sale process (requirements, guidelines, timelines) are nearly identical for these government short sale programs, regardless of who the investor on the loan is.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/ 

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 


Fannie Mae Makes the Moves for Even Faster Short Sales

Seattle Short Sales - Sunday, February 17, 2013

The trend continues: Lenders do not want to foreclose on you. Foreclosure is not only undesirable for struggling homeowners trying to deal with underwater properties. Foreclosure is a costly way for lenders (including both loan servicers and investors) to deal with non-performing mortgages. Short sales are an alternative to forelosure, and this week, Fannie Mae announced a new tool to make the short sale process even faster and easier.

Some of the issues that can slow down a short sale approval include:

  • needing guidance for a recommended listing price for the property
  • disputing the BPO (Broker’s Price Opinion), or fair market value of the property
  • delays in hearing back from the loan servicer (bank)
  • stumbling blocks between parties during negotiation of an offer.

If a short sale case has come up against one of the issues listed above, the new Fannie Mae tool, called Home Path For Short Sales, allows selling agents to escalate the short sale case. When agents escalate the case, Fannie Mae will contact the servicer to address the issue that is stalling the short sale process. According the DSNews, agents who have used the Home Path For Short Sales tool to escalate cases saw results within one to two days.

Fannie Mae’s new Home Path For Short Sales tool continues the trend that we have been seeing in the last twelve months, as lenders and servicers turn increasingly towards short sales for loss mitigation. Late last year, new FHFA guidelines were announced that will streamline the short sale approval process . In addition, a few weeks ago, Freddie Mac released information about its “shorter short sale” approval process.

To find out whether a mortgage loan is owned by Fannie by visiting https://www.knowyouroptions.com/loanlookup. And find out more about Fannie’s new Home Path For Short Sales tool at http://www.homepathforshortsales.com/.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/
 

Freddie Mac’s “Shorter Short Sale”

Seattle Short Sales - Saturday, February 02, 2013

Freddie Mac Executive Vice President Tracy Mooney published a blog post last week outlining how short sales are about to become even faster, easier, and more transparent. We wrote an article about Freddie’s new “Standard Short Sale” program last November, back when those new guidelines first came into effect. A highlight of that program is that loan servicers (the bank you hold your mortgage with) are now authorized, in many cases, to approve short sales - without having to pass the file by the investor (Freddie, Fannie, etc.) or the mortgage insurer.

Mooney’s article focuses on how the new “Standard Short Sale” guidelines will make the short sale approval process faster. In fact, Mooney estimates that these new guidelines will knock off 50 to 75% off of short sale approval timelines! Some of the guidelines that will improve short sale processing times are:

  • Timelines for decisions: Servicers are supposed to make a decision about a short sale within 30 days of receiving the completed application. They may take up to 30 additional days if time is required to negotiate with third parties.
  • Better communication: If servicers take the extra 30 days to make their decision, they must provide weekly status reports.
  • Better escalation process: Servicers must provide borrowers with a clear procedure in order to escalate their file, including a dedicated 1-800 number for that.

Fannie Mae is also following these Freddie guidelines. Most residential home loans in America are backed by either Freddie Mac or Fannie Mae. You can find out whether your mortgage loan is owned by Freddie here: https://ww3.freddiemac.com/corporate/. You can find out whether your mortgage loan is owned by Fannie here: https://www.knowyouroptions.com/loanlookup

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

New FDMC Guidelines Mean Streamlined Automatic Short Sale Approvals

Seattle Short Sales - Thursday, November 01, 2012

New FDMC (Freddie Mac) guidelines, which take effect today (November 1, 2012), will streamline the short sale process even more, and will allow loan servicers to issue automatic short sale approvals - without having to bring the file to the investor or the mortgage insurer. These new Freddie Mac short sale approval guidelines were drafted in cooperation with FNMA (Fannie Mae) and FHA, who will also apply them - which means that they will apply to the majority of Americans who have a home mortgage.

The aim of Freddie, Fannie and FHA in bringing in these new guidelines is to streamline the whole short sale process by putting the decision-making authority back to the loan servicers. If homeowners meet certain baseline criteria, the servicers are now authorized to approve a short sale themselves, without ever having to bring the file to the investor. We’ll go through all of the significant details of these changes below - but the important thing to understand is that this is great news for anyone considering a short sale, because it means that a part of the process that slows things down has been eliminated. Short sales will be both simpler and faster.

The key difference between the previous system, what Freddie calls the “classic short sale,” and the new guidelines for a “standard short sale” is that servicers are delegated to approve short sales, without having to refer the file to the investor, provided that the following requirements are met:

  • the homeowner is 31 or more days delinquent on mortgage payments
  • the homeowner is current, or less that 31 days delinquent, but has undergone one of the four eligible hardships.

The four eligible hardships are:

  • divorce or separation
  • death of the borrower or the primary wage earner
  • long-term permanent disability of the borrower or dependent family member
  • distant employment transfer or relocation (including PCS for service members)

However, if a borrower is current and does not meet one of the four eligible hardships, and the servicer still feels that they should be considered for a short sale, the servicer may still send the file to the investor to review. In other words, if the borrower doesn’t meet the criteria above, they still may be approved for a short sale - just the servicer does not have the authority to approve it without passing it to the lender.

For borrowers who are 31 or more days delinquent, all property types are eligible for the servicer-approved “standard short sale” - including primary residences, investment properties, and second homes. However, for borrowers who are current or less than 31 days delinquent, the home must be their primary residence, and their monthly debt-to-income ratio must be greater than 55% (service member with PSC orders are exempt from this last requirement).

Freddie Mac will provide guidance in choosing a listing price, based upon a BPO (Broker’s Price Opinion) that is to be undertaken as early as possible in the short sale process. That listing guidance is to be passed to the borrower and broker through the loan servicer, but it is up to them to choose the final listing price. The transaction must, after deducting commissions and other closing costs, meet Freddie’s minimum net proceeds requirements in order for the approval to be issued. It is important to note, that the suggested listing price based upon the BPO may not necessarily meet Freddie’s minimum net proceeds requirement.

Other aspects of the “standard short sale” guidelines that are not new include guidance on timelines:

  • servicers must acknowledge receipt of the purchase offer within three days
  • servicers must respond with a decision within 30 days, or with an explanation for the delay, allowing them up to 30 more days
  • if servicers require the delay, they must provide the borrower with weekly updates
  • if servicers counter the offer, 15 days are allowed for this process

Requirements about the short sale deal being an “arm’s length transaction” have not changed, but Freddie now provides servicers with a template form to assist them with this requirement. Homes may not be resold for 30 days following the short sale, and they may not be resold for a value more than 120% of the short sale purchase price for 90 days (this clause is to prevent fraudulent “flipping” transactions with two buyers).

If the requirements above are met, and the borrower has acted in good faith, Freddie Mac does not pursue the borrower for the deficiency. This means that the amount that the balance owing was discounted by when the mortgage was paid out following the short sale - which is often in the order of $100,000 - is permanent debt relief for the borrower: their lender will never pursue them to pay that discount back.

The “standard short sale” program has a lot of similarities to the government’s HAFA program - so Freddie will be phasing out their participation in HAFA at the end of this year. As for HAFA the “standard short sale” program will allow up to $3,000 in relocation assistance for the borrower upon completion of the transaction - but it is important to understand that this is total relocation costs. For example, if a new employer is contributing $1,000 to relocation costs, then Freddie will contribute a maximum of $2,000. Also similar to HAFA, through the “standard short sale” program, lenders may allow up to $6,000 total towards subordinate liens; junior lien-holders may not receive anything from the borrower.

As we've noted, this is great news. Short sale approvals are up, and the time to process them is already down from a year ago. These changes will streamline the short sale process even more, and make the approval process even faster.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/


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