WASHINGTON (11/6/12)--The Federal Housing Finance Agency's (FHFA) efforts to streamline short sales for mortgage servicers, lenders, and borrowers, and promote housing market recovery, are positive, but a broader application of new short sale guidelines could have a negative impact on home mortgage financing, the Credit Union National Association (CUNA) said in a comment letter.
Federal Housing Finance Agency (FHFA) guidelines that went into effect on Nov. 1 will allow homeowners whose mortgages are held by Fannie Mae or Freddie Mac to sell their homes through the short sale process, provided they have an eligible hardship and are current on their mortgage payments. The death of a spouse or home co-owner, divorce, disability and job relocations of 50 miles or more will be considered eligible hardships under the new guidelines. Additional approval from Fannie Mae or Freddie Mac will not be needed in these cases.
Military personnel who are being relocated due to Permanent Change of Station orders would also be automatically eligible for short sales, and would not be obligated to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes under the new guidelines.
The guidelines also streamline the short sale process for homeowners that have missed several mortgage payments or have low credit scores. Fannie Mae and Freddie Mac will also be permitted to offer as much as $6,000 to second lien holders to expedite short sale closings. The guidance also clarifies when applications and sales offers must be submitted for a home sale to be considered a short sale.
CUNA Regulatory Counsel Dennis Tsang in the letter encouraged the FHFA to limit the application of new short sale guidelines to short sales only and not apply them to other types of borrower situations in which the borrower would like to remain in the home. The guidelines could also interfere with the ability of creditors to pursue deficiencies under state law, the letter added.
CUNA urged the FHFA to closely monitor the implementation of the new short sale guidelines, and to solicit and incorporate additional feedback from mortgage participants regarding the short sale program throughout its implementation.
For the full CUNA comment letter, use the resource link.