By Mike Colpitts
The nation’s giant mortgage lenders will force banks and mortgage servicers to enforce new guidelines to speed up short sales. Freddie Mac and Fannie Mae will require lenders to respond to requests for short sales from mortgage borrowers within 60 days under a new mandate ordered by the Federal Housing Finance Agency.
Amid growing consumer complaints, lenders have taken months to respond to borrowers’ requests for a short sale, which often result in the loss of a home purchaser.
The change is being ordered as part of the federal government’s efforts to clean-up the damaged housing market after more than five years of declining home values in the majority of the U.S.
The servicers must respond to borrower’s requests for short sales within 30 days of receiving documentation, and take up to a maximum of 60 days to issue a decision should negotiations with investors and mortgage insurers be delayed.
Short sales allow homeowners at risk of losing their homes to foreclosure a way to sell their property at less than what is owed on the mortgage balance to a new buyer. Some lenders require that mortgage holders re-pay the difference, but most homeowners won’t accept the requirement as part of the sale.
Bank assisted short sales are increasing in volume as lenders realize that homeowners underwater on mortgages are more likely to walk away from a mortgage, despite future fall-out from damage to their credit.
The new requirements go into effect June 15. Under the mandate, lenders are required to initially respond to mortgage holder within three days of receiving a contract to purchase a home.
Should the contract still be under review in 30 days, bank servicers must provide weekly status reports to the borrower.
“FHFA and the enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure,” said FHFA acting director Edward DeMarco, who was appointed to his position by President Barack Obama. “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”