I have heard anecdotal stories that there does not have to be a delinquency however, I have no experience of this. I do have 3 listings coming up that the borrower is not behind ... can anyone share their experiences getting either rejections or approvals for current borrowers ?
Cheers
Marty
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I tell my sellers it is ALWAYS better for your credit report and peace of mind to be current and not delinquent. Some people cannot sleep at night if they are delinquent. I have closed many many short sales in which the sellers were current, and I truly believe that is the best way to approach a short sale, especially with a documented hardship. However, as with short sales, nothing is ever black-and-white. Investor guidelines and even the interpretation of the investor guidelines can vary.
Fannie and Freddie both no longer require a borrower to be delinquent as long as they have one of the following hardships:
Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that
Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that
will align and consolidate existing short sales programs into one standard short sale program.
the streamlined program rules will enable lenders and servicers to quickly and easily qualify
eligible borrowers for a short sale.
the new guidelines, which go into effect Nov. 1, 2012, will permit a homeowner with a Fannie
Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on their
mortgage if they have an eligible hardship. Servicers will be able to expedite processing a short
sale for borrowers with hardships such as death of a borrower or co-borrower, divorce,
disability, or relocation for a job without any additional approval from Fannie Mae or Freddie
Mac.
These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment
to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said
FHFA Acting Director Edward J. DeMarco. “The new standard short sale program will also
provide relief to those underwater borrowers who need to relocate more than 50 miles for a
job.”
Bryant - have you found FNMA applying the Nov standards re relocation? I have had a number of current borrowers where FNMA denies the SS for lack of delinquency, when we are specifically going in under relocation. After escalating directly to FNMA, they claim the hardship doesn't fit into the 'death, disability or divorce' rationale. No traction for relocation, despite the 2012 announcement.
I have several FNNMA deals pending right now that are distant job relocation. They have been approved. Just be sure the hardship letter and affidavit are all in sync that the relo is the hardship.
Are these pending FNNMA approvals current or delinquents?
Bryant is correct, but there is an important detail he left out: If there is no delinquency, then the new rule of no deficiency may not apply. It will be up to the GSE, but like Minna said, prepare for a note or contribution.
I've had currents be approved. Freddie and Fannies. They are just always more likely to ask for a note/cash when they borrowers are current.
You can also find that hardship definitions will help you out. There is usually a hardship letter involved in the process. Loss of employment (especially long term), change in income ability (reduction in pay or position in the same company or a new job), injury causing loss of work, pshychological care causing inability to work, divorce, moving for a job, a balloon note coming due when property is upside down, possibly a variable rate mortgage increasing beyond ability to pay, and possibly many other conditions can create hardship.
Once a hardship is determined to exist it can help open the file depending upon the lender's/servicer's definitions of hardship.
Marty,
They do not necessarily have to be delinquent, it depends on the investor. Our company always tries to push clients short sales through while they are current.
Brett@ishortsalenow.com
310-564-6389
www.ishortsalenow.com