Short sales have earned the reputation of taking a long time to be approved. There have been a few announcements made this year which should help speed up short sales. One thing to understand about all these announcements is that each applies to specific loans.
The Federal Housing Finance Agency (FHFA) recently announced that banks will be required to respond on short sales within 30 days with a final decision within 60 days. Banks and servicers who don’t reply will face monetary and other penalties. After 30 days, the banks would be required to send weekly updates telling you precisely where holdups are and when they are likely to be resolved. These changes are effective June 15th and pertain to loans owned or backed by Fannie Mae and Freddie Mac.
HAFA is not a new program but the program has been extended through 2013. There have also been updates to the program which should make the process more effective. With a HAFA short sale, the borrower is able to get price that the bank is willing to accept prior to listing the home. The timeline for getting the price is 30 days. This compares to the 90-120 day approval period found in traditional short sales. HAFA is available to Fannie Mae and Freddie Mac loans. It is also available to loans serviced by banks participating in the HAMP program. The HAFA updates are effective as of June 1st.
The recent National Mortgage Settlement with Bank of America, Chase, Citibank, Wells Fargo and Ally should also provide additional efficiencies with short sales. The changes are meant to improve and streamline the short sale/foreclosure process at these banks which should help speed them up. The banks are also incentivized to push the paperwork through. The settlement terms do not apply to Fannie Mae, Freddie Mac or FHA loans. Check the National Mortgage Settlement website for more information.
FHA loans are not included in the above changes. FHA loans have their own standards. Those borrowers needing to do a short sale on FHA mortgage should ask their real estate professional about the FHA pre-foreclosure program.
If you are facing a short sale, work with a realtor who is able to assess your specific situation. If you live in Chicago or south suburbs, please feel free to contact me to discuss your options.