Fannie Mae and Freddie Mac will require loan servicers who need more than 30 days to make a decision on a short-sale offer to provide weekly status updates and give a thumbs-up or thumbs-down no later than 60 days after receiving an offer.
The new short-sale timelines, announced this week by Fannie and Freddie’s regulator, the Federal Housing Finance Agency, take effect in June as the first step in a broader effort to "develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure."
FHFA said it expects additional changes to be in place by the end of the year that address borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.
Freddie Mac issued more specifics on its new short-sale timeline, which applies not only to offers on properties in Freddie Mac’s traditional short-sale program, but to requests from borrowers to be considered for a short sale or deed-in-lieu of foreclosure under the Home Affordable Foreclosures Alternatives (HAFA) program.
Although Freddie Mac expects loan servicers to make a decision within 30 days, it recognizes that servicers may need more time to obtain a broker price opinion or approval from a private mortgage insurer before accepting a short-sale offer or approving a HAFA borrower response package (BRP).
If a loan servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
Freddie Mac, which completed 45,623 short sales last year, said the new requirements are the latest step to comply with direction from the FHFA to set consistent servicing and delinquency management requirements.
"Short sales are more complex than routine home sales since they may involve multiple parties and long-distance negotiating," said Tracy Mooney, Freddie Mac senior vice president, single-family servicing and REO, in a statement. "Freddie Mac’s new timelines are intended to help make the decision process more transparent and timely for short sales under the Obama administration’s HAFA program or Freddie Mac’s traditional short-sale option."
Last week, Bank of America announced it’s cut decision times on short-sale offers to no more than 20 days, down from 45 days or longer. If offers fall through, agents have five days instead of 14 days to submit a backup offer.
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