Fannie Mae and Freddie Mac have announced aggressive new guidelines applicable to short sales involving FM loans. The intention, as with most of the recent changes in federal “distressed property” programs, is to streamline the short sale process. Many experts, this writer included, harbor serious doubts whether the guidelines can be achieved.
Chief among the new guidelines, effective June 15, 2012, is the requirement that servicers review and respond to short sale offers or requests within 30 days. Servicers requiring more than 30 days must transmit weekly updates to the borrower/seller, and in all cases provide a final response within 60 days. For HAFA short sales, the clock starts ticking once the borrower has presented a complete short sale approval package. Requests for pre-approval of short sales also must be completed within the new time frames.
As one who has been tracking short sales since 2007, I frankly question whether these new deadlines can — and will — be met. Certainly, I have observed situations where short sales are processed start-to-finish in 2 months or less; however, these are far and away the exception than the rule. More typically, the short sale process from submission of the borrower’s package to issuance of approval by the servicer is 3-4 months or longer. And indeed the timeline can be extended significantly where short sale approval must be issued by more than one lender/servicer.
The new guidelines provide financial incentives to servicers that complete short sales within the new FM timeline. In addition, banks servicing Fannie loans risk fines and other penalties if they fail to follow the guidelines. However, from what I’ve been able to determine, these penalties represent a proverbial “slap on the wrist.” Only time will tell whether servicers that have to date have dragged their feet in processing short sales will now suddenly “snap to” and provide the timely review and approvals that have left far too many borrowers hanging. Hope springs eternal….
Here is a link to a complete copy of the Servicer Guide Announcement: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2012/svc1207.pdf