Weitz Law Firm - 520 Kirkland Way, Ste 103 - Kirkland, WA - (425) 889-9300

Monday, September 3, 2012

New Seattle Short Sale Policies


A recent article on the FANNIE AND FREDDIE short sale procedures and policies along with our take.

For more information on your rights in the Short Sale process, consider contacting a Seattle Short Sale Specialist.

WASHINGTON -- If you're underwater and facing financial distress, what might Fannie Mae's and Freddie Mac's new short sale-overhaul policies mean for you? Potentially a lot -- even if you are current on your mortgage payments and never imagined that a short sale and principal reduction could be in the cards.

Here's what's involved: Starting Nov. 1, owners whose loans have been purchased or guaranteed by Fannie or Freddie may qualify for a 
short sale if they fit key hardship criteria, including: unemployment; divorce; long-term disability; a change of employment that is more than 
50 miles from the current home; a business failure; death of the primary or secondary wage earner; or a natural or man-made disaster.

Our take: in general, I think this is a great policy for fannie and Freddie. To date, many of our clients have been forced to go 

delinquent on payments in order to have a short sale approved. With this new policy, hopefully clients that do a hardship 
can have a short sale approved without damaging their credit rating as harshly.

Short sales allow borrowers and lenders to avoid the crushing costs of foreclosure by bringing in a new purchaser for the house at what is 

normally a price well below the amount owed to the lender. In a successful sale, the distressed owner receives a write-down of the portion of the principal not covered by the new buyer's price.

Our take: a ‘write-down’ is not technically correct. What we aim for is a ‘waiver of deficiency’ so our clients will not owe 

money at the conclusion of the short sale. That said, it is NOT AUTOMATIC and must be NEGOTIATED.

In what could be a far-reaching change, Fannie and Freddie will allow borrowers current on their 

mortgage payments -- not seriously delinquent as traditionally required -- to qualify for short sales, provided they fit the "hardship" criteria.

Borrowers considered "most in need," that is, they are far behind on payments, have depressed credit scores and are facing financial stress, 
will be eligible for streamlined processing of short sales, involving reduced documentation and much speedier resolutions than usual.

Under rules that took effect in June, loan servicers already are required to operate on fast timelines for short-sale requests. They are 
supposed to respond to borrower requests for short sales within 30 days of receipt of an offer by a purchaser, and must give applicants 
a final decision within 60 days of receipt of a completed short-sale package.

In the past, short sales often have been drawn out and contentious, sometimes taking more than nine months to close. They have also had 

a high rate of failure and cancellations, when buyers get frustrated and bail out of the transaction after waiting for banks and loan servicers 
to make decisions and process paperwork.

Banks that hold second mortgages or credit lines secured by the house have been another choke point. As lien holders, they can block the 

entire transaction if they feel they are not being properly compensated along with the first mortgage holder, and have frequently blown up 
deals with their demands. Under the new Fannie-Freddie rules, second lien holders will be entitled to a maximum of $6,000 out of the 
proceeds of the sale.

The broadening of short sales to those current on their mortgage payments but encountering serious hardships could help huge numbers of 

underwater homeowners. Though the Federal Housing Finance Agency has no estimates of how many borrowers might be assisted by the 
change, its acting director, Edward J. DeMarco, has said that 4.63 million loans in Fannie's and Freddie's combined portfolios are underwater, 
and that approximately four-fifths of these are current on payments.

She added that the new rules won't solve all the problems, however. For example, banks owed large sums on second mortgages may not 

be satisfied with the $6,000 maximum payoff to release their liens, even though they know that in a foreclosure their second liens likely would 
be worthless -- the first lien holder must be paid first.

Among other key changes in Fannie and Freddie short sales:

* Members of the armed forces who receive permanent change-of-status orders and are underwater will be automatically eligible for short sales, 

even if they are current on their loan payments.

* In states where Fannie and Freddie have the legal right to pursue "deficiencies" when short sale proceeds do not pay off the existing debt, they 

will waive that right and instead ask borrowers who have sufficient assets or income to make "cash contributions" or execute promissory notes 
to cover part of the shortfall.

To find out whether your loan is owned by Fannie or Freddie, visit either FannieMae.com/loanlookup or FreddieMac.com/corporate.


For more information on your rights in the short sale process, consider contacting a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
425.889.9300

weitzlawfirm.com

9 comments:

  1. In short sale, people pay whole amount of property in time and they can get best credit from banks. Short sale is very good for both buyer and seller.

    شقق مفروشة الرياض

    ReplyDelete
  2. I heard that Fannie Mae and Freddie Mac Realty has increased their incentive in every completed short sale. Mike Warren Real Estate

    ReplyDelete
  3. Thanks, I’ve seen your blog before during my, all of the ex-pats are linked together, which is really cool. Thanks for the mention and I put your link up here too.
    Florida foreclosures for sale

    ReplyDelete
  4. Thanks for great information you write it very clean. I am very lucky to get this tips from you.

    Residential Real Estate for Rent

    ReplyDelete
  5. Hello there! I am glad to stop by your site and know more about real estate attorney. Keep it up! This is a good read. You have such an interesting and informative page. I will be looking forward to visit your page again and for your other posts as well. Thank you for sharing your thoughts about real estate attorney in your area.
    If you're buying a home, your real estate agent should check that there are no covenants, easements, liens, etc. registered against the property that will impede your use of it.
    As your real estate closing attorney we will answer questions you might have and resolve disputes that may arise at any time during the closing process. If you are a seller, we will help resolve and clear any issues that may be found in the examination of a property's title and prepare the deed for transfer from the seller to the buyer.

    Real estate attorney Lowell ma

    ReplyDelete
  6. Buyers must present documentation of funds or a preapproval letter from a lender with their offer for a short sale; sellers need to present this to their lender within three days of receiving the offer.

    Professional Legal Network

    ReplyDelete
  7. Commercial Real Estate closings is the major part we solve most of the time. We assist individuals and businesses with their legal needs in areas of Residential & Commercial Real Estate closings, Family Law, Immigration Law, Business Law, Wills & Estates and all kinds of Notary Services.

    ReplyDelete
  8. This article was a really interesting read, information has been presented in a clear and concise manner. Thanks!
    short sale florida

    ReplyDelete
  9. Cheers!
    Great post! Very informative.
    Thanks for possibility to write on your website,
    it's great!
    I’m still hoping there will be more posts on this site.
    Thanks a lot!

    Business Attorney Boston

    ReplyDelete