Short Sales with Conventional Loans: Fannie Mae and Freddie Mac
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.
Fannie Mae and Freddie Mac have almost identical short sale guidelines, although Freddie Mac tends to be a little stricter. 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.
HOW TO KNOW IF YOU’LL QUALIFY:
If your mortgage payments are current:
- The subject property must be principal residence (Fannie Mae and Freddie Mac routinely decline short sales on non owner occupied property where the owner is current).
- You must have a hardship that qualifies for imminent default. (What qualifies as a hardship?)
If your mortgage payment are behind, but less than 90 days:
- You must have a qualifying financial hardship and prepare a full borrower response package including financial documentation.
Fannie Mae and Freddie Mac offer 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
FIND OUT IF YOU QUALIFY FOR A SHORT SALE!
BASIC OUTLINE OF THE SHORT SALE PROCESS:
Assuming you qualify per the above criteria, a short sale with Fannie Mae/Freddie Mac 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.
- A property valuation will be ordered which will need to support purchase price.
- Payoffs to junior lien holders will need to be negotiated to Investor acceptable standards
GETTING A RESPONSE :
Once an offer has been executed Fannie and Freddie expect 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 a counter is delivered 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 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.
FREE SHORT SALE SURVIVAL GUIDE!
A STEP BY STEP MANUAL FOR GETTING THROUGH THE SHORT SALE PROCESS!
THE APPROVAL:
Upon conclusion to short sale negotiations approval is reached and closing will take place within the next 30-45 days and:
- Fannie Mae and Freddie Mac will always grant a full deficiency waiver.
- Qualifying owner occupants receive a $7,500 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 May 18, 2026 by Minna Reid