In the past if you were upside down on your mortgage but still current on your payments you may have been told you would not qualify for a short sale. This could cause further hardship if you had experienced a divorce, job transfer or other life changing event that was going to make it increasingly difficult to maintain your payments. Or, as a potential buyer interested in a short sale property listed on the market you may have heard how difficult and time consuming the process would be while waiting on the bank to make a decision. We have maintained in several previous posts that approving more short sale applications and improving the process will impact the market in a significant way by keeping foreclosures out of the market place. With encouragement from the National Association of REALTORS it seems that this is exactly what the FHFA is accomplishing. For many these situations may be a thing of the past with new guidelines being put into place as of November 1st of this year by the Federal Housing Finance Authority. Let’s see what a few of the changes are and how they will help change the situation of home owners, buyers and the market.
Certain home owners do not have to be delinquent to qualify:
The new guidelines will allow certain home owners who are still current on their mortgage to qualify for a short sale. To qualify you must have a mortgage that is insured by Freddie Mac or Fannie Mae. To verify if your mortgage is backed by one of these agencies you may visit http://www.FannieMae.com/loanlookup or https://www.FreddieMac.com/corporate/.
After determining this you must have one of the following hardships:
• Death of a borrower or death of the primary or secondary wage earner in the household • Unemployment • Divorce • Long-term disability • Distant employment transfer/relocation (more than 50 miles one way) • Increased housing expenses • Disaster (natural or man-made) • Business failure
Less required documentation and faster processing:
In an effort to expedite the approval of more short sales many guidelines are being put into place to streamline the process. One key change is that home owners who have low credit scores and have missed several payments will be required to provide little or no documentation to prove the need for a short sale. This will also help buyers in the market as much of the delay in getting an approval has been waiting on the collection and review of endless amounts of documentation. To keep the process moving lenders will be required to adhere to strict time lines for considering short sales. They must review and respond to a short sale offer within 30 days, provide weekly status updates if an offer is under review for more than 30 days and submit a final decision within 60 days of receipt of the offer and completed documentation.
Fannie Mae & Freddie Mac will waive their right to pursue a deficiency judgement after a completed short sale in exchange for a financial contribution towards the difference when the owner has the income or assets to enter into such an agreement. Evaluating this situation will now be part of the approval process. Special consideration will be given to military personnel who are being relocated. Service members will be automatically eligible for short sales whether they are delinquent or not and will not be required to contribute funds to cover the short fall on the mortgage. The last major financial change is that Fannie Mae and Freddie Mac will offer up to $6,000 to pay off secondary liens on the property. In the past negotiating a second mortgage could drastically slow the process down and this change will help to keep things moving forward.
These changes have the potential to benefit numerous people and we ask that if you or someone you know may benefit from a short sale of their home please reach out to us. A short sale has the potential to change someone’s financial outlook and will certainly help the real estate market by keeping a foreclosure from happening. I am a Certified Short Sale Specialist and our team has the dedication, sincerity and experience to successfully negotiate a short sale. More information about the new guidelines may be found at this website.
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