Finally, some good news for short-sellers

Policy changes by two of the biggest players in the mortgage market could open doors to home purchases this fall by thousands of people who were hard hit by the housing bust and who thought they’d have to wait for years before owning again. More

To continue reading this article, please do one of the following.



Finally, some good news for short-sellers

Posted 9/9/13

Policy changes by two of the biggest players in the mortgage market could open doors to home purchases this fall by thousands of people who were hard hit by the housing bust and who thought they’d have to wait for years before owning again.

Fannie Mae, the federally controlled mortgage investor, has come up with a “fix” designed to help large numbers of consumers whose short sales were misidentified as foreclosures by the national credit bureaus. Under previous rules, short-sellers would have to wait for up to seven years before becoming eligible for a new mortgage to buy a house. Under the revised plan, they may be able to qualify for a mortgage in as little as two years. Homeowners who are foreclosed upon generally must still wait for up to seven years before becoming eligible again to finance a house through Fannie. Industry estimates suggest that more than 2 million short-sellers might be affected by credit bureaus’ inaccurate descriptions of their transactions.

Meanwhile, the Federal Housing Administration has announced a new program allowing borrowers whose previous mortgage troubles were caused by “extenuating circumstances” beyond their control to obtain new mortgages in as little as a year after losing their homes instead of the current three years. They will need to show that their delinquency problem was caused by a 20 percent or greater drop in income that continued for at least six months, and that they are now “back to work,” paying their bills on time and earning enough to qualify for a new FHA-insured mortgage.

Fannie Mae’s policy change came after months of prodding by the federal Consumer Financial Protection Bureau, Sen. Bill Nelson, D-Fla., the National Consumer Reporting Association, the National Association of Realtors and Pam Marron, an outspoken Florida consumer advocate. They all sought fairer treatment of borrowers who had participated in short sales in recent years. Marron, a mortgage broker, spotted the erroneous reporting of short sales on credit reports and mounted a campaign to correct the problem.

In a short sale, the lender approves the sale of a house to a new buyer but typically receives less than the balance owed. In a foreclosure, the bank takes title to the property and seeks to recover whatever it can through a resale. Though the two types of transactions are distinct and involve significantly different losses for banks – foreclosures are far more costly on average – the nation’s major credit bureaus have no special reporting code to identify short sales. As a result, say critics, millions of people who have undertaken short sales in recent years may have their transactions coded as foreclosures on their credit-bureau reports.

Next Page
Calendar
PBN Hosted
Events

Two Great Programs...One Great Event. PBN's Annual Celebration of Growth and Innovation is now underway. 2014 applications are now available. Deadline August 1st.
  • 40 Under Forty
    We're almost sold out. The 10th Anniversary of 40 Under Forty, and PBN is planni ...
  • Healthiest Employers
    See who the Healthiest Employers in RI are! And save the date - August 14th - at ...
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News
    Advertisement