More than four years into the housing crisis, the powers that be finally have created new rules to make the short sale process easier and speedier.
Starting in June, mortgage servicers will no longer take months or years to respond to a short sale request, if they follow the new guidelines released by the Federal Housing Finance Agency.
The rules apply to loans owned or backed by Fannie Mae and Freddie Mac, which account for more than half of the outstanding mortgages in the United States.
In a short sale, the lender allows the borrower to sell the house for less than what is owed on the mortgage. Short sales are a great alternative to foreclosure when they work. Because of the frustration of dealing with lender delays, many borrowers give up on the process.
But that could change when the new guidelines go into effect as servicers will be required to:
- Acknowledge receipt of short sale offers within three business days.
- Review and respond to short sale request within 30 days after they receive the offer and the borrower's request.
- Update borrowers weekly if the offer is still under review after the 30-day period.
- Make a final decision on the offer by no later than 60 days after the offer and borrower's request are received.
A couple of months ago, I told you the FHFA was on a mission to make short sales more attractive to borrowers and lenders. This is the first step the agency has taken since then.
It says it will announce additional enhancements to simplify the short sale process by the end of the year.
The changes are key to the housing recovery, says the National Association of Realtors.
"NAR knows that delays in approving short sale requests remain a significant challenge for Realtors and consumers and often result in canceled contracts and the property going into foreclosure," says NAR president Moe Veissi.
But more is needed.
"While these new guidelines will hopefully help close short sale transactions at higher rates, we believe legislation is still needed to impose mandatory deadlines on all loan servicers," Veissi says.
Do you think servicers will become efficient in processing short sales?
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