Fannie Tries Short Sales Over Foreclosures

Fannie Mae has launched pilot projects in Phoenix and Orlando intended to reduce foreclosures by pre-approving short sales, agreeing on a price and the loss it will take prior to a deal even being made. It is hoped the program will improve the popularity of short sales among real estate agents.

Property professionals initially had welcomed short sales but soon found the process to be a frustrating one–due to squabbling about the sale price and slow approval times by the mortgage companies–that often ended with no sale at all.

“Short sales have received such a bad reputation among real-estate agents that, as a portion of the overall mortgage market, they have gone down,” says Tom Popik of the research firm Campbell Communications, whose November survey of realty practitioners found that agents had to wait as long as 8.1 weeks to receive a response from the lender on a short sale. That was nearly double the 4.5 weeks the process took earlier in the year.

Fannie Mae’s pilot will focus on homes that are listed at less than the mortgage balance and carry a Fannie Mae-backed loan serviced by Countrywide Financial Corp.
If it proves successful, the concept could be expanded to other geographical areas and additional lenders. There are concerns, in the meantime, about the program’s success, with real estate agents noting that property prices could decline before the pre-approval is issued.

Source: The Wall Street Journal, Nick Timiraos (01/09/09)

Much needed and long overdue, let’s hope that Countrywide expedites their trial run of this program.  Although I will say that picking through RMLS of late I do occasionally see a short sale listing that is already “pre-approved”.

It’s new policies and procedures like this that will also speed along recovery not just in the local market but in the national market as well.  The sooner we start moving the “difficult” inventory, the sooner we start moving all of the inventory.  If we as a community (and we few remaining brokers) are going to survive this market we are going to have to start coming up with better processes and more creative solutions to this challenging market.

Homeowners, listen up:

If you are concerned about your mortgage payments, or have had a life altering event take place (job loss, pay cut, illness, etc.) and feel that you have to sell your house, don’t wait to take action.  The sooner you start communicating with your bank the more options will be available to you.  Mortgage banks want another short sale or foreclosure like they want another hole in their head right now.  They will work with you as long as you communicate cleary your situation.  They may offer a refinance, or a temporary payment plan. 

Worst comes to worst and you have to sell, there are still options to avoid foreclosure.  You can sell your home for less than you owe.  Obviously, the more notes (mortgages) you have against your property the more complicated it becomes, but not impossible.  If for whatever reason it does not sell, you can do what is called a “deed in lieu of foreclosure”, where you willingly give the keys back to the bank.  But note that your bank will most likely want to have had your home on the market for a designated period of time. 

But let’s stop and think a moment.  Selling your home may not be the wisest move.  In times of crisis, we go after the biggest threat, purely out of instinct.  Maybe bankruptcy is a better solution, that will keep you in your most secure investment until the market turns again (because it always does) and your investment starts appreciating again.

Opinions expressed in this article are the opinions of author, and not to necessarily the opinions of Meadows Group Inc.
All rights reserved on all original content, non-original content is given credit | Michelle Berry | 2009