I can't believe that Fannie Mae, operating under government conservator-ship, is telling short sale sellers to go into default. The U.S. Department of Treasury is giving Fannie Mae up to $200 billion dollars to bail it out. Yet, what we have here is the government telling short sale sellers to stop making their mortgage payments.
Fannie Mae is now rejecting short sales for sellers who are current on their payments. Flat out rejecting them. Which means sellers who hope to get short sale approval from Fannie Mae must stop making their mortgage payments. This sounds so bizarre to me. But it's happening on 2 of my Sacramento short sales. The first I thought a fluke, but on the second, Fannie Mae says being in default is its new policy in order to approve a short sale.
On the one hand, Fannie Mae guidelines clearly state that a seller who fits certain criteria, one of which is having no more than a 30-day late, may qualify to buy another home immediately. On the other hand, with this recent change in policy, Fannie Mae is making it practically impossible for a short sale seller with good credit -- a short sale seller who wants to do the responsible thing and continue paying on a mortgage -- to do a short sale and maintain that good credit.
That's because of the lengthy process to get a short sale approved. To maintain a credit rating that fits Fannie Mae guidelines to buy again immediately, a short sale would need to be completed, from start to finish, in 59 days. Many lenders take 6 to 8 weeks to process a short sale. Fannie Mae review takes another couple weeks.
Does anybody see anything wrong with this? Why would the government tell responsible home owners who are in distress to trash their credit by going into default on a mortgage? If the short sale doesn't go through because the buyer flaked out somewhere along the way, a seller's home could go to foreclosure. Why is the government adding to the flood of foreclosures?
This makes me want to tear out my hair and go running naked in the streets. Except that would just get me arrested.
Here is the link where you can go to find out if Fannie Mae holds your loan.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.
Photo: Big Stock Photo
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
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The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
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Elizabeth: I have heard of several instances where homeowners... usually "older" folks, who sometimes have a more fully-developed sense of fulfilling obligations... have been told that their home does not, or will not qualify for a short sale because they are current in their payments. They have to show definite evidence of a "hardship"... and I guess that if they are current on their payments... the lender/lien-holder will NOT put them into a "hardship" category... thus denying them to be able to qualify for a short sale.
So... while not actually "telling them" they should stop making their payments... the message is obviously there.
By the way... I tried to find your book... but was unable to. :(
You know, if it isn't a crime it should be. Unbelievable, really unbelievable. And what is to be done about it. Probably nothing, we sit back in shock and frustration watching things spiral more and more out of control.
Elizabeth: Pick up the phone and call your Senators and Congressmen today. In my personal opinon, if our elected officials are shoving bailout money out the doors and into Fannie Mae's pockets, we need to hold our elected officials accountable for madness like this that ensues at this psuedo-government agencies.
Hi Karen: You can order my book from any bookstore or just click the link in my blog above to buy it from Amazon.
In my experiences in dealing with sellers who are current, those sellers have been able to demonstrate a hardship, thereby qualifying for a short sale, even while they continued to make their mortgage payments. They still got approved for a short sale. But Fannie Mae has now put a stop to that.
Unbelieveable , Elizabeth! I recently heard about this happening to someone in our area, a few months ago - they stopped making their payments, and now the house is in foreclosure. There will probably not be a short sale, and the owner will be spanked by his poor credit for several years- because he followed that horrible advice. Just ridiculous!
So Elizabeth,
To be clear, Fannie Mae will not consider a Short Sale even if we show the homeowner is only making payments with savings or credit cards but not from income?
It's no wonder this country is turning into a mecca of scams artists...the ones that try to do the right thing are punished and the scammers who created this mess are out on the loose.
I just read an article that talked about how many of the mortgage brokers that sold these toxic mortgages are now doing loan modifications and ripping the SAME people off for the second time. What is going on?
Elizabeth,
I have been trying to quickly search www.efanniemae.com this morning to locate the announcement. Unable to find anything specific to short sale - but alot of new information relative to HAMP. I am wondering if this is a tactic by your lenders to force the delinquency due to the HAMP program coming online.
I will get back to this - this is SO, SO wrong!!!
Anytime the government is involved in a process I seem to be able to find something terribly wrong with it, this is no exception.
Elizabeth - I had not heard of that, yes, it is insane!
I should be surprised but when it comes to banks and short sales I guess it is a new story nearly every time I get involved with one.
Elizabeth,
It is amazing, crazy and insane! Sidney's response sums it all up!
Hi Sidney: Yes, even if the sellers are making those payments from borrowed funds, and many of them are.
Hi Cathy: I don't expect you'll find that information on Fannie Mae's web site. It's not the sort of thing Fannie Mae probably wants made public.
Wow, why does it seem we are going backwards?
This must be a new policy. I closed a FNMA short sale in early July where the seller never went delinquent on their mortgage, and never had been delinquent in the history of their mortgage. The seller actually dealt with their negotiator, and I didn't have to call them at all. (they had been FSBO for a long time, but I got their listing after I showed it once) Very determined seller, for sure. It went through pretty well.
Elizabeth - I'm a huge devotee of primal scream therapy. Make certain if you decide to pull your hair out and run naked in the street, you let me know. I want to watch and cheer you on. I'd participate with you, but at my age, it would be described as a public nuisance, if I were to take my clothes off:-)
Hi Elizabeth... It's not just Fannie Mae. I have been doing short sales for over 5 years and had many rejected by different lenders because the seller was current on their mortgage. There is seemingly no credit given to sellers for being responsible or proactive.
Hi Steve: It's one thing if a bank rejects a short sale because it wants the seller to be in default, but it's totally another thing if a quasi-government agency such as Fannie Mae, an entity receiving bailout money on top of it, tells a seller to go into foreclosure.
That's a really good point. I hadn't really looked at it from that perspective, but then again, it was nearly 1:00 A.M. when I commented! :) Happy Friday!
Greetings:
Our seller client just told us that he cannot afford to close on his house for anything less than his asking price of $220K because he is literally broke and would need to come to the closing table with money that he doesn't have. He has not received any offers at all until today when a buyer offered $175K maximum. The loan is owned by FNMA.
He has been making his payments until now but has missed his October 1st payment.
Do you think that his missing the payment and future payments is the best or only way to get a short sale accomplished through FNMA? Also, will FNMA feel that we should have first lowered the asking price in order to secure a stronger offer? Thanks.
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<!--EndFragment-->Thank you Elizabeth. We very much appreciate your insights! It's amazing that FNMA will entertain a short sale under these circumstances, even though seller only defaults on one month and subsequently makes payments.
Hi Mark: Well, I obviously can't guarantee that tactic will work, but it makes sense to me and is probably worth a try.
Last Friday I received short sale approval for a buyer on this very deal, which I wrote about on August 19th. This seller was current, but Fannie Mae rejected the short sale for that reason. So the seller did not make his September or October payment. On October 2, we got approval. But I would think that he could continue making payments at this point so it wouldn't affect his credit as much afterward; however, I represent the buyer on this and not the seller.
Very interesting Elizabeth. How does FNMA, or a primary lender for that matter, feel about a buyer (who has an accepted offer on their existing home) putting a clause in the purchase agreement, in what will be a short sale transaction, that this transaction is contingent upon the successful closing of buyer's current home. Your insights are very much appreciated. Thanks.
Hi Mark:
I don't believe any of the lenders care about contingency clauses as long as the buyer performs.
ELIZABETH,
These cases or policies come about because of a large portion of the population that look for loopholes to be able to circumvent the programs that are out there to help people in need. All the "tricks" agents and other entities have tried to fast track a short sale has made the Lenders, Fannie and Freddie included, put it policies that make it even harder to get the really needed the relief they need.
I know many people who have bought homes before they did a Short Sale on a property so that they could take advantage of their credit before it would get trashed. I know of people who started Short Sales simply because they didn't want to continue to pay on an upside down property. I know lawyers and loss mit firms that change up front and just clog the system with unworthy files. We all know agents that submit multiple offers to Lenders and again clog the system. We all know agents that submit bogus contracts just to get the 'ball rolling" and maybe get an approved price to use to get a real buyer.
The lack of professionalism within our ranks and with lawyers, loss mitigation outfits is partly responsible for the rules to be implemented that seem to counter what we are all trying to do...Help the Homeowner.
I'm working on an IndyMac short sale right now and Fannie Mae is the investor. I was told this morning by IndyMac that Fannie Mae will not consider a short sale until the borrower is 31 days late. The offer and short package have been submitted to IndyMac, the borrower is current, and now they have to intentionally miss a payment and wait at least 31 days before they will be considered for a short sale. I am irate.