Considering a short sale? Did you know the lender you make your payments to usually doesn’t even own your loan, and will not in fact be making any decisions about your short sale? Lenders (servicers) simply service loans to investor guidelines. The most common conventional loan investors are Fannie Mae and Freddie Mac. You can find out if your loan is owned by Fannie Mae or Freddie Mac by using their online lookup tools.
While both investors have similar standard short sale guidelines, today we’ll look at Fannie Mae. A guide to Freddie mac will be addressed in a separate post. Keep in mind the entire guidelines are much more complex and what you see below is an outline. Refer to a qualified local short sale specialist for more detail.
Average Joe’s guide to understanding Fannie Mae short sales
HOW TO KNOW IF YOU’LL QUALIFY:
If your mortgage payments are current:
- The subject property must be principal residence (Fannie Mae routinely declines short sales on non owner occupied property where the owner is current)
- You must have a hardship (What qualifies as a hardship?)
- Your debt to income ratio must be over 55%
If your mortgage payment are behind:
- You must have a hardship
Fannie Mae offers a streamline short sale option involving less documentation if:
- Mortgage payments are 90 days+ behind
- Your credit score is below 620, or if the mortgage debt was discharged in a Chapter 7 bankruptcy
BASIC OUTLINE OF THE SHORT SALE PROCESS:
Assuming you qualify per the above criteria, a short sale with Fannie Mae will always follow the same basic process (subject to servicer interpretation):
- Fannie Mae will require the property be listed with a real estate agent (How to find a qualified short sale listing agent)
- The property needs to listed on the open market for a minimum of 5 days including a weekend before any offer can be executed.
- The real estate agent will need register and process the short sale in Fannie Mae's Homepath platform
- A property valuation will be ordered which will need to support purchase price
- Payoffs to junior lien holders will need to be negotiated to Fannie Mae's acceptable standards
GETTING A RESPONSE FROM FANNIE MAE:
Once an offer has been executed Fannie Mae expects servicers to respond within 30 days with either an approval, counter or decline (some servicers will simply disregard these timelines in which instance your Realtor will need to escalate the situation).
Most of the time Fannie Mae delivers a counter which will need to be negotiated. Counters can address several things – payments to junior lien holders, closing cost fees, purchase price and/or seller contributions. For the best odds of success, your real estate agent should be HIGHLY experienced with short sales to be able to guide you through this process with ease.
Requests for cash contributions or promissory notes will always be evaluated by Fannie Mae unless:
- The borrower qualifies for the streamline short sale option
- State law prohibits such an action
- The borrower is an active duty military with orders to relocate the service member from the subject property which must be a principal residence
In all other cases Fannie Mae routinely at least requests some type of seller contribution which can usually be negotiated.
Upon conclusion to short sale negotiations approval is reached and closing will take place within the next 30-45 days and:
- Fannie Mae will always grant a full deficiency waiver
- Qualifying owner occupants receive a $3,000 relocation incentive
Did you know the right short sale agent will handle all of the above on your behalf, get your short sale to closing seamlessly, and it won't even cost you anything?
Reid Real Estate Group specializes in short sales and has been the leading short sale team in CT since 2010!
Last Updated on September 13, 2022 by Minna Reid