I started pursuing a short sale back in early December with Wells Fargo which services the loan for Fannie Mae. I have been going through divorce process for 1+ years with spouse going from hot to cold on wanting to work on things. Meanwhile I have been stuck with paying for everything and then some. I have not gone late but have been draining my savings every month and had to give half to my separated spouse who blew it all in short order. We are semi working on things but meanwhile the townhouse continues to be a drain on me and it is $100k underwater since I bought it in spring 2007.

I have a short sale agent who has done several in my community (oh boy) and we got everything submitted to Wells basically twice. They had a BPO done which came in around $138,500 which is reasonable but Fannie comes back asking for $147,500 which is above market as there has been many other homes around me that are nearly new going for that price. My agent knows the area well and says that is just way too high. They also asked for $2k at closing from me. We started the sale with a cash offer at $130K when the short sale was submitted. The buyer came back with a $135k offer hoping we could may settle around $140k. Instead Fannie Mae changes it's mind and just declines the SS because my divorce is not recent and my DTI is to low so they say. I'm still separated from wife going 1.5 years and not sure what that is going. Wells was also saying that the loan was not owned by Fannie or something to the effect but I clarified that real quick with a call and they then said it doesn't fit the new streamline criteria rules. Wells sends me a decline letter that suggests a SS or DIL which made me laugh.

A week or so later I get a call from the Wells home preservation specialist saying that I'm basically pre-qualified for a Deed-in-lieu instead. I was confused at this point and asked why would they not do the SS and rather got this route. He said it would be faster and not involve any agents. At this point I realized the Fannie Mae games where being played and that they would rather take the house back so they can sale it through Homepath like the petition says. I told Wells I would consider it and then I informed my agent of the game that has started.

I have not received any DIL papers yet so interested to see where this go but did get the SS decline letter with basically no reason on it as to why it was denied other than that Fannie denied it. My agent has re-submitted everything to start over but I don't know where this is going at this point. My agent thinks it is because I'm not delinquent on my payments at this point is why they denied but he has made it clear to me that he will not counsel me one way or another to stop paying but he has not had a SS go through yet that was not delinquent. At this point I'm ready to stop paying and push this forward but it seems to me that Fannie Mae is playing games.

Any recommendations as to what to do now?