Answers on Short Sales

Jul 1, 2013

With the decline in property values as a result of the housing crisis, Short Sales have become a larger share of home sales and an important tool to prevent foreclosure. This week, we’re answering five common questions about Short Sales. If you think a Short Sale could benefit you, read on!

What’s a Short Sale?

A Short Sale is a real estate transaction selling a home for less than what is owed on the mortgage. The bank or financial institution that holds the mortgage (your mortgage company) must approve a Short Sale since it means taking a loss on the loan.

You may want to consider a Short Sale when:

  • You’re ineligible to refinance or modify your mortgage
  • You’re facing a long-term hardship
  • You’re behind on your mortgage payments
  • You’re underwater on your home (owe more on your home than it's worth)
  • You haven't been able to sell your home at a price that covers what you still owe on your mortgage
  • You can no longer afford your home and are ready or need to leave
  • What is Fannie Mae's role?

What is Fannie Mae's role?

If Fannie Mae owns your loan, Fannie Mae provides direction to your mortgage company that includes borrower eligibility guidelines, specific list price guidance, offer requirements, and other potential foreclosure alternatives available to you if you do not meet the eligibility requirements for a Short Sale.

What is the role of my mortgage company?

Your mortgage company handles all interactions with you and determines your eligibility for a Short Sale. If a Short Sale offer meets Fannie Mae's guidelines—including acceptable offer price, terms and normal and customary expenses—then certain mortgage companies can approve and close the transaction on Fannie Mae's behalf. If an offer does not meet Fannie Mae's guidelines, the mortgage company can submit the offer to Fannie Mae to determine if the offer is acceptable.

What are my options if a Short Sale isn't approved?

Your mortgage company will discuss the options available to you, which may include Mortgage Release, another option to avoid foreclosure. Three Mortgage Release exit options are available (sometimes with a relocation incentive) to help you leave the home immediately; stay in the home for up to three months without paying rent; or lease the home (at market rates) for up to one year. Depending on your situation, you may be required to make a financial contribution to receive a mortgage release.

Is Fannie Mae concerned about Short Sale fraud?

Yes! Fannie Mae remains committed to preventing mortgage fraud whether perpetrated by a borrower, a lender, or another person or institution. Fannie Mae is concerned about a range of short sale frauds, which can increase taxpayer losses and destabilize neighborhoods. Some examples of Short Sale fraud were covered in a previous NewsFeed article.

If you have information concerning fraud involving a Fannie Mae property, call 800-732-6643 or report the scam online.

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