Investor Central

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Tuesday, May 11, 2010

Fannie Mae Policy Change

Fannie Mae has given homeowners more reason than ever to consider a short sale as first option.  Effective July 1, 2010, Fannie is changing their policy to allow a homeowner who has executed a short sale to buy a new home again in as soon as 2 years.  In the case of a foreclosure, the timeline is 7 years.  As Fannie and Freddie back half of al mortgages or more, their policies are key in reading how the mortgage industry will approach homeowners who were previously distressed.

Previously, a borrower was required to wait four years before getting a new mortgage, or two years if their home sold in a short sale. Under the new guidelines, a borrower that previously completed a deed-in-lieu of foreclosure transaction can get a new mortgage in two years, provided the borrower has a 20% down payment. If the borrower has a 10% down payment, the wait period is still four years. In some extenuating circumstances, the wait period can be reduced to two years with a 10% down payment for deed-in-lieu of foreclosure, but not for short sales.

Originators are required to manually underwrite mortgages after the waiting period if the borrower previously completed a short sale. This new policy is effective for manually underwritten mortgage loans with application dates beginning July 1, 2010.

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