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Changes to the HAFA Short Sale

Beginning June 15, Fannie Mae and Freddie Mac will require mortgage servicers to make decisions on short sales under new guidelines, specifically:

  • acknowledge the documentation was received within three business days;
  • notify the borrower within five days if more paperwork is needed;
  • review and respond to a borrower within 30 days of receiving all documentation for short sale properties (the servicer can take up to 60 days on a decision if negotiations with mortgage insurers or other stakeholders linger); and
  • provide weekly status updates to the borrower if a short sale decision lingers past the 30 days.

The new Federal Housing Finance Agency (FHFA) guidelines are designed to assist the most inventory-constrained markets in the United States with inventory levels by moving properties through the short sale process more efficiently.

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Short Sales And Credit Scores – Short Sale Education

A couple of months ago, I wrote the blog “Bankruptcy, Foreclosure, or Short Sale? What happens to my Credit Score?” This month, I’d like to give an update on Short Sales and Credit Scores.

Credit Score:Drops score approximately 60-100 points
Length of Time on Credit Report:7 years
Buying Another Home: Qualify for a mortgage with a decent interest rate after 18-24 months

Note: There are several caveats when it comes to a short sale because short sales are relatively new and credit bureaus are still trying to figure it into their credit risk modeling. In fact, in the future, it has been analyzed that some lenders may look at a short sale the same as a foreclosure.

Above states an 60-100 point hit for a short sale and this hit does depend on how many payments were missed prior to the completion of a short sale

For a short sale, it has been reported that a credit report will show Satisfied with a note that states “Creditor settled for less than the amount due”. If you are lucky, you will just get “Paid In Full”. This does not happen often. Most likely, a short sale will show as a charge off or a settlement

Lenders using the Fannie Mae and Freddie Mac mortgage approval system will see mortgage payments that are 120 days late or receipt of a Notice of Default the same as a foreclosure

Many lenders may not consider a short sale unless the homeowner is late, but more are considering a short sale even if the homeowner is not late with a convincing and full proof of a hardship

Homeowners who have a mortgage under water are more inclined to try a short sale ”short sale” before throwing their hands in the air and going to foreclosure or go through bankruptcy. In 2009, the National Association of Realtors estimated that about ten percent of all sales last year were short sales and it is expected to increase this year.

With Obama’s HAFA program, lenders are provided incentives to perform short sales and so are homeowners because under this program they would receive $1500 for relocation costs.

There is still a lot of confusion around how a Short Sale Secrets will affect a borrower’s credit score. It really depends on how many lates a homeowner has had on their mortgage and how the lender decides to report it to credit agencies, Experian, Equifax, TransUnion.

The main point that homeowners should realize is that if they are successful on doing a short sale to get out of their situation, the road to credit recovery is shorter than if they went to foreclosure. Protecting ones credit score will help to minimize the amount of interest a borrower pays on credit cards an loans.

It has been reported that a homeowner would be able to buy a home after 2-3 years, given they continue to work on their credit after a short sale. If they went to foreclosure, they would have to wait as long as 7 years.

Many homeowner are frustrated on figuring out how to resolve their mortgage being underwater and many are just walking away but this is a mistake. A homeowner can ask for a short sale even if they are not late on their mortgage, but the reality is that a lender has no incentive to allow a short sale if payments are still being made on time.

There are some states that do not allow lenders of 1st mortgages to pursue a seller for the unpaid balance. But in all states, second liens and equity credit lines can pursue the seller unless an agreement has stated otherwise. Borrowers will have to pay tax of any unpaid mortgage balance unless they meet IRS’s home exclusion or insolvency rules. Owners of second or investment properties do not qualify for the home exclusion rules.

Look out for our future blogs/articles from our Short Sale Leadership Series content.To view our blog updates, visit www.whbsolutions.com/blog.

Article Source: http://www.articlesnatch.com

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For more information on becoming a Short Sale Education Leader in your community, join WHB Solution’s community of Short Sale Success and join short sale experts at www.whbsolutions.com/members

Secondary Mortgage Market

Conventional financing assistance and loan programs are offered by private lenders, non-profit organizations, savings and loan institutions, credit unions, commercial banks, mortgage banking companies and state and local housing finance agencies. These lenders, the originators of loans, are also called primary lenders.

By extension, the primary mortgage market is the place where loans originate and are issued directly to the homebuyer by primary lenders.

After issuing loans to homebuyers, primary lenders have the option to keep it in their portfolio or to sell it to the secondary mortgage market in order to replenish their funds and have more money available to issue new loans. The secondary mortgage market includes investors and financial companies, pension funds, housing GSEs (Government Sponsored Enterprises) and other financial agents.

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are the two GSEs that purchase loans from the primary lenders. Their purpose is to support homeownership. They replenish primary lenders funds and support their financial activity so that lenders have money available for more mortgage loans.

Fannie Mae and Freddie Mac do not lend money directly to homebuyers. Instead they fund several of the affordable financing programs in place in the mortgage market and publish a number of educational materials for the public, in some instances in other languages than English, to provide consumers with the necessary tools to become knowledgeable in the home-purchasing and home-owning process.

The loans issued through their sponsorship are called conforming loans because the primary lender drafts the loan according to the secondary purchaser s terms. Their loans are designed to help people become homeowners in spite of the challenges they face, such as coming with a down payment or having credit problems.

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