On April 14, 2010, Fannie Mae announced that a new waiting period will be established for anyone with a short sale or pre-foreclosure sale. The waiting period will vary depending on the loan to value of the transaction and whether extenuating circumstances contributed to the borrower's financial hardship. Loss of employment, illness, death of a wage earner, etc are common examples under which an exception might be granted.
Both terms of"short sale" and "pre-foreclosure sale" are interchangeable in this announcement. Fannie has clarified that each have the same meaning of "the sale of a property in lieu of a foreclosure, resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer."
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Waiting Period After a Pre-foreclosure Sale, Short Sale, or Deed-in-Lieu of Foreclosure |
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Pre-foreclosure Event |
Current Waiting Period Requirements |
New Waiting Period Requirements |
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Deed-in-Lieu of Foreclosure |
4 years Additional requirements apply after 4 years up to 7 years |
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Pre-foreclosure Sale |
2 years |
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Short Sale |
No policy currently exists specific to short sales |
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Exceptions to Waiting Period for Extenuating Circumstances |
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Pre-foreclosure Event |
Current Waiting Period Requirements |
New Waiting Period Requirements |
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Deed-in-Lieu of Foreclosure |
2 years Additional requirements apply after 4 years up to 7 years |
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Pre-foreclosure Sale |
No exceptions permitted to the 2 year rule |
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Short Sale |
No policy currently exists specific to short sales |
The above changes are effective with all mortgage applications date July 1, 2010 and after. This policy does not impact the current rulers pertaining to buyers with a previous foreclosure.
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