Fannie Mae Guidelines for Short Sellers

I often receive calls from Northern Michigan homeowners who are looking for advice as to how to proceed when they are no longer able to make their house payments. Fannie Mae has released updated underwriting guidelines which will apply to new mortgage loans sought by individuals with various types of prior credit problems. These guidelines certainly may impact the decisions made by these homeowners who are trying to decide how to deal with their present situation.

Potential borrowers with a foreclosure on their credit record must wait 5 years to be considered for new funding, and are subject to additional credit and down payment requirements for 5 to 7 years. This is an increase from the previous 4 year waiting period. Bankruptcies (other than Chapter 13) require a 4 year waiting period from either the discharge or dismissal date, while Chapter 13s require only a two year waiting period from the discharge date or 4 years from the dismissal date. In the case of multiple bankruptcies, the waiting period is extended to 5 years. The waiting period for Deed-in-lieu-of-foreclosures is unchanged at 4 years, with additional requirements for 4 to 7 years. The biggest change is the implementation of a mandatory two year waiting period from the completion date of any preforeclosure or short sale. The shortened waiting period for short sale sellers will certainly make short sales a more attractive option for homeowners over the alternatives.

I always advise people who need help to seek the advice of not only competent mortgage and real estate professionals, but also to consult with a real estate attorney before taking any action which they may later regret.