Fannie Mae has updated the requirements regarding the time period in which a borrower can become eligible for a mortgage loan. The requirements favor Short Sales.
The change in the guidelines is very important as Fannie Mae guarantees and owns a large portion of mortgage loans on the secondary market. Fannie Mae and Freddie Mac combined own more than one-half of all loans in the United States.
The following is an brief overview of the Fannie Mae guidelines:
Bankruptcy (All except chapter 13) - 4 year time period from either the dismissal or discharge date of the bankruptcy action.
Bankruptcy/Chapter 13 - 2 years from the discharge date or 4 years from the dismissal date.
Foreclosure - 5-7 years following completion date, minimum 10% down, 680 credit score.
Deed-in-lieu of Foreclosure - 4-7 years following completion date, minimum 10% down.
Preforeclosure/Short Sale - 2 year time period from completion date.
The guideline clearly shows the advantage for a homeowner to short sale their home rather than letting it go to foreclosure.
Source : https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf
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Maria Mastrolonardo is a Realtor Associate with RE/MAX of Naperville and has been assisting home-buyers and home-sellers since 1997. Maria can be reached at (630) 248-6077 or email: mmastrolonardo@remax.net
Servicing the towns of: Naperville, Aurora, Lisle, Plainfield, Bolingbrook, Warrenville, Wheaton, Woodridge or other surrounding areas.
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Marie I think there is also a psychological advantage as well. Most sellers would much rather not tell people they lost their home to foreclosure.