Starting tomorrow, mortgage giants Fannie Mae and Freddie Mac have a green light from nine private mortgage insurers to approve short sales for distressed borrowers without a separate review.

Fannie and Freddie require that borrowers take out mortgage insurance if they are making down payments of less than 20 percent of the value of the home they are financing. Letting loan servicers working for Fannie and Freddie approve short sales and deeds in lieu of foreclosure without a separate review by mortgage insurers has the potential to reduce costs, delays and uncertainty, Freddie Mac said in announcing the move.

The nine mortgage insurers that have agreed to expedite short sales are CMG Mortgage Insurance Co., Essent Guaranty Inc., Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., PMI Mortgage Insurance Co., Radian Guaranty Inc., Republic Mortgage Insurance Co., Triad Guaranty Insurance Corp., and United Guaranty Corp.

In announcing the new agreement, Fannie Mae said it previously had individual delegation agreements with the "majority of its top mortgage insurers." Having a standard delegation agreement in place all nine mortgage insurers makes the approval process "more consistent and efficient for servicers and borrowers."

The new delegation agreement allows loan servicers to approve any short sale or deed-in-lieu that meets Fannie and Freddie’s requirements without individual mortgage insurance approval.

"We applaud the nation’s mortgage insurers for committing to work with us and our servicers to help more borrowers obtain short sales and other foreclosure alternatives," said Tracy Mooney, senior vice president for loan servicing and REO at Freddie Mac, in a statement. "By paving the way for more borrowers to avoid foreclosure, today’s announcement will support the housing recovery and help reduce taxpayer losses."

Fannie and Freddie’s new streamlined short sale approval process also goes into effect tomorrow. The mortgage giants will offer up to $6,000 to second-lien holders to expedite a short sale, and reduce or eliminate paperwork requirements for borrowers who have missed several loan payments, have low credit scores, or have serious financial hardship.

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