April 15th, 2010 2:44 PM

Many people today are considering short sale as an option to foreclosure. How does that effect the sellers ability to obtain a mortgage in the future? Today, Fannie Mae announced an immediate change to it's guidelines that could help some buy a new home sooner than in years past.

According to a letter posted yesterday (4/14/10) by Marianne E. Sullivan, Senior Vice President at Fannie Mae, borrower waiting periods will be shortened if they put more money down on their purchase. This move is in an effort to support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their debt.

Here are the changes:

Waiting Period After a Preforeclosure Sale, Short Sale, or Deed-in-Lieu of Foreclosure

Preforeclosure Event	Current Waiting Period Requirements	New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure	4 years Additional requirements apply after 4 years up to 7 years	• 2 years - 80% maximum LTV ratios • 4 years - 90% maximum LTV ratios • 7 years - LTV ratios per the Eligibility Matrix
Preforeclosure Sale	2 years
Short Sale	No policy currently exists specific to short sales
Exceptions to Waiting Period for Extenuating Circumstances Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.). The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations.
Preforeclosure Event	Current Waiting Period Requirements	New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure	2 years Additional requirements apply after 2 years up to 7 years	2 years - 90% maximum LTV ratios
Preforeclosure Sale	No exceptions are permitted to the 2-year waiting period
Short Sale	No policy currently exists specific to short sales

Based on my experience, exceptions are rarely granted by lenders out of fear of loan repurchase requests by Fannie Mae so I wouldn't count on this as an option. Overall this is welcomed news as it will help fuel the next round of purchases for everyone.

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts
Envoy Mortgage

Office: (972) 661-5136 Fax: (972) 314-9647

17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com

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