Short sales have become a popular tool of foreclosure prevention, with Fannie Mae completing over 70,000 short sales last year, and nearly 40,000 in the first half of 2012. For a homeowner experiencing negative equity—the current value of the home is less than the mortgage balance due—a short sale is often the best choice to retain as much credit as possible.
The basics of the new Fannie and Freddie short sale guidelines are as follows:
■Homeowners with certain hardships can be eligible without being in default. Those hardships include death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer.
■Reduction in documentation required.
■Limit of $6,000 to subordinate lien-holders (this is supposed to prevent subordinate lien-holders from scuttling the deal while they try to negotiate a higher payoff).
■Eligibility for military families who get Permanent Change of Station orders.
Note, these new short sale guidelines apply to Fannie Mae and Freddie Mac loans. To find out if your loan is owned by Fannie Mae or Freddie Mac, visit either www.fanniemae.com/loanlookup or www.freddiemac.com/corporate
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