Whittier homeowners who have negative equity and have been experiencing a personal hardship could soon have help from the Federal Housing Finance Agency. Effective November 1, 2012, new short sale rules go into effect that will streamline the process for all mortgages backed by Freddie Mac and Fannie Mae. Since these government-sponsored agencies support over half of all active mortgages in the country, the changes could have wide-reaching impact.

Until now, homeowners who were current on their mortgages were not usually eligible for a short sale. This created an unfortunate "incentive to default" which often led to foreclosure. The new rules cure that issue, and improve other important elements of the process. Here's a sample of the major changes.

1. Homeowners who are up-to-date on their mortgage payments can now be considered for a short sale, if they have a qualifying hardship. For the purpose of the program, a qualifying hardship involves any one of the following:

  • Divorce
  • Death of borrower or co-borrower
  • Disability
  • Job loss
  • Job relocation, or new job, located 50 miles away or more from current home

2. Homeowners who are behind on their mortgage payments, and are suffering from a qualified hardship, will have their cases reviewed in an expedited manner, with fewer documentation requirements.

3. Second lien holders will have a financial incentive to cooperate with the short sale on the first mortgage. The incentive is capped at $6,000.

4. Mortgage servicers working on behalf of Freddie Mac and Fannie Mae will be empowered to approve qualifying short sales directly.

5. Homeowners who have financial resources at their disposal will be required to make a contribution to the short sale. In return, they will not face deficiency judgments for the remaining balance of the mortgage.

If you are thinking of selling your home and it has negative equity, contact your mortgage lender to find out if your loan is part of Freddie Mac or Fannie Mae's portfolio. From there, it's a matter of obtaining the appropriate forms and staying in touch with your lender throughout the process. Keep in mind that lenders will need to update their internal processes to match the new rules, and information at this point could be a bit lean.

When selling your Whittier home, it pays to gather good information from the start! Our Whittier real estate market changes quickly and these new rules are just one example why. Also, the new short sale guidelines could affect our market in the upcoming months by adding inventory. These are just a few reasons why working with dedicated, experienced real estate professionals is an absolute must.

Do you have questions about real estate, or need information about your neighborhood sales activity? Contact us today for the very best in local expertise and friendly, professional service! We will be happy to provide the latest Whittier market information and help you succeed with your goals!

The Domis Team
Prudential California Realty
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