New Federal Timelines for Short Sales
Recently, there has been an important change in Federal Housing law directed at streamlining the short sale process. On April 17, 2012, the Federal Housing Finance Agency (FHFA) announced new minimum requirements regarding response timelines for short sale requests. The new requirements will come in stages, with the first taking effect on June 15, 2012. With this first installment of requirements, loan servicers will be required to review and respond to requests for short sales within 30 calendar days of receiving a short sale offer or a completed Borrower Response Package (BRP). If more than 30 days are needed, servicers must provide the borrower with weekly status updates. Servicers must ultimately make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer or BRP.
Short sales occur when a lender agrees to sell a home for less than what is owed on the mortgage and forgive the difference. Short sales can be a viable alternative to foreclosure, and the United States real estate market has experienced a steady increase of short sales since the beginning of the year.
The new FHFA guidelines are directed at speeding up the short sale process, which has historically taken several months to complete. The requirements however, only apply to servicers of Fannie Mae and Freddie Mac loans and not to servicers of private loans.
Future requirements will be announced prior to the end of 2012 and will address borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.
For more information, please contact Dave Holland at 814-870-7755 or any other attorney in MacDonald Illig's Real Estate Practice Group.