Fannie Mae loan software can't tell the difference between short sale, foreclosure

Homeowners who’ve been through foreclosure generally can’t get a mortgage for seven years if they’re going through a lender who’s planning to sell the loan to Fannie Mae. A short sale will disqualify them for only two.

But Fannie Mae’s automated loan underwriting system can’t tell the difference between a short sale and a foreclosure, requiring loan underwriters to use a more laborious manual process to get borrowers who’ve been through a short sale approved for a Fannie Mae loan.

Fannie Mae says a new code being implemented Nov. 16 will let loan originators tell the automated system when a foreclosure was really a short sale, avoiding the need to use the manual underwriting process. Source: