Short sales, already on the rise this year, are expected to get an additional boost from a move by federal regulators who oversee Fannie Mae and Freddie Mac to streamline paperwork and offer up to $6,000 to second-lien holders who can derail the process.

Fannie Mae and Freddie Mac will offer up to $6,000 to second-lien holders to expedite a short sale, the Federal Housing Finance Agency announced this week, and require reduced or no documentation from borrowers who have missed several loan payments, have low credit scores, or have serious financial hardship.

For borrowers who are still current on their mortgages, loan servicers will have more leeway to process short sales for homeowners facing hardships like a death in the family, divorce, disability, employment transfer or relocation.

Military personnel being relocated will be eligible for short sales automatically, even if they are current on their existing mortgages, and will be exempt from deficiency judgments.

Other homeowners who have sufficient income or assets will be asked to contribute funds to cover part or all the shortfall between the outstanding loan balance and the sales price on their homes.

The National Association of Realtors welcomed the new guidelines, which take effect Nov. 1. NAR said it worked closely on the guidelines with FHFA, Fannie Mae and Freddie Mac.

"NAR believes that improving short-sale eligibility will allow more families to avoid foreclosure and reduce the negative impact foreclosures have on families and communities," the trade association said in a statement. "Short sales also help stabilize home values and neighborhoods by keeping homes occupied, which benefits the housing market and aids in the recovery."

Guy Cecala, publisher of the trade publication Inside Mortgage Finance, told the Wall Street Journal that $6,000 may not be enough of an incentive for some second-lien holders to agree to sign off on a short sale.

But short sales are already on the upswing, the Journal noted, citing statistics from loan data aggregator CoreLogic that such transactions made up 8.8 percent of home sales in May, compared with 7.6 percent at the same time a year ago and 6.5 percent during all of 2010.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription