New regulations were announced August 22nd that relax certain restrictions for home owners with mortgages to sell their homes. By announcing several “hardship” factors, the Federal Housing Finance Agency has made it possible for those with Fannie Mae or Freddie Mac backing to short sale even if they are current on their mortgage.
Among the hardships now approved include divorce, disability, death of a borrower or co-borrower, or even job relocation, provided said relocation was further than 50 miles away from their current address. This all comes as part of an effort to “demonstrate the FHFA’s… commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA acting director Edward J. DeMarco in the agency’s public statement.
Also among the new allowances:
- Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments for borrowers wishing to to short sale that also have sufficient income and can make financial contribution and/or sign a promissory note.
- Military service personnel are automatically eligible for short sales upon relocation, no matter the location of the duty station.
- Up to $6000 will be offered by but Freddie Mac and Fanny Mae to second lien holders in order to quicken the pace of short sale.
This comes as additional relief to those who were able to avoid the first wave of foreclosures, but who find themselves in this all too familiar position. With the housing market starting to finally rebound, those could provide a crucial lift to the hardest hit sectors which might otherwise act as an anchor for the better performers.
While this might not seem as important to recovery as growing markets and rising house prices, neither of those indicators could trend as highly without the stability that a solid, sturdy platform provides for them to grow out of. In effect, these new regulations foster that very environment. They help to keep cheap foreclosures off the market, which helps real home owners to more easily reach a reasonable price for their home once they look to sell.
These new guidelines will take effect starting November 1st of this year. The guidelines were worked out in cooperation with the National Association of REALTORS, the FHFA, and the government sponsored enterprises. With these soon to be in place, it is hoped that they will allow more American homeowners avoid defaulting on their mortgage loan.