In our last article, we discussed the different types of short sales available and some of the details of the HAFA short sale program, in particular. In this article, we discuss some of the requirements and provisions of the Fannie Mae and Freddie Mac short sales.
The Federal National Mortgage Association, often referred to as Fannie Mae or FNMA, offers a short sale program for any mortgages it owns where the “Borrower” is facing the following:
- is facing a long-term hardship,
- is behind on mortgage payments,
- is no longer able to afford to continue making mortgage payments,
- is ineligible to refinance or modify the mortgage, and
- has been unable to sell the home at a price sufficient to fully pay and satisfy the mortgage indebtedness, because it exceeds the value of the home.
If you are approved by Fannie Mae for a short sale, you will have no further liability for any deficiency, following the consumption of the sale. In addition, you will be eligible for up to three thousand dollars ($3,000) for relocation assistance. Moreover, you can begin repairing your credit far sooner than if the foreclosure was completed, and you will be able to qualify for another Fannie Mae mortgage in as little as two (2) years, as opposed to seven (7) years if the foreclosure were completed.
The Federal Home Loan Mortgage Corporation, often referred to as Freddie Mac or FHLMC, also offers its own short sale programs for its borrowers. To be eligible for a Freddie Mac short sale, the Borrower must be current with their mortgage obligations or less than thirty-one (31) days delinquent if they occupy the premises as their primary residence. They must have an eligible hardship, such as divorce or separation, a death of a borrower or primary wage earner, long-term or permanent disability, or employment transfer or relocation. They must also have listed the mortgaged premises for sale with a licensed real estate broker who, in turn, must have published the availability of the premises for sale on Multiple Listing Service (MLS) for at least five (5) consecutive days, including one weekend, prior to the submission of the short sale application.
Like Fannie Mae, Freddie Mac only allows three thousand dollars ($3,000) for relocation expenses, as opposed to the ten thousand dollars ($10,000) under HAFA, although servicers can always provide additional financial incentives from their own funds, as long as they do not deduct the payment from the short sale proceeds.
Freddie Mac short sales are available not only for primary residences but also for investment properties and second homes. As with HAFA short sales, borrowers cannot enter into an arrangement wherein a third party takes a title and arranges a short sale in exchange for a fee.
Finally, unless the real estate broker’s commission exceeds 6% of the homeowner’s mortgage, the servicers may not renegotiate a lower sales commission as part of the short sale process.
Join us next time, when we finish this series by discussing FHA short sales. If you have any questions or comments, please contact me at peter.roach@roachlawfirm.com.
Peter Roach
Peter T. Roach & Associates, P.C.
