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Lenders issue new rules for making short sales

As the national trend of turning to short sales instead of foreclosure grows, federal officials have responded to concerns that the overall process takes too long. Recently, Fannie Mae and Freddie Mac announced a new set of guidelines for mortgage lenders that is designed to speed up the short sale process for homeowners looking to sell their property. This is positive news for South Carolina homeowners looking to avoid foreclosure.

Beginning June 15 this year, lenders will be obligated to follow new guidelines for processing their customer's requests for short sales. As the rules become effective, mortgage servicers will have 30 days to respond to requests for short sales. Otherwise, the lenders have 60 days to reply with their decision if they provide weekly status updates.

If the request is being submitted under the Home Affordable Foreclosure Alternative program, as soon as a borrower response package is submitted, lenders are liable for providing a response within the designated time constraints. On the other hand, if the sale is not part of the federal program, the 30 days' time begins as soon as an offer from a potential buyer is submitted. As for now, it is not exactly clear what repercussions mortgage servicers face if they do not adhere to the new rules.

Currently, the average short sale transaction takes six months to complete, so these new rules have the potential to provide relief to underwater homeowners in a much more expedient fashion. Many real estate professionals laud the idea behind this change, but are unsure exactly how the policy will work in practice.

This announcement is good news for beleaguered homeowners, especially considering that short sales can prove to be more beneficial than foreclosure. Despite impending improvements in the short sale process, there are still a lot of legalities and potential obstacles to navigate. As the new guidelines are rolled out, it will be seen how effective the new policy is and what kind of assistance sellers will need to streamline the process.

Source: The Journal Gazette, "Short-sale rules engender doubt," Kathleen Pender, May 7, 2012

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