Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.
The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.
Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).
Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.
The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.
If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.
According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.
In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.
Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.
“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”
Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.