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Friday, October 26, 2012

Short Sale for Non-Delinquent Homeowners

  Mortgage giants Fannie Mae and Freddie Mac have issued new short sale rules effective Nov. 1 that will allow short sales for underwater homeowners who are not behind in mortgage payments. Presently, homeowners must be behind in mortgage payments to qualify for a short sale. In order to be eligible a hardship must exist, such as loss of employment or income due to economic conditions, illness, loss of a spouse, etc.


Although a homeowner never missed a mortgage payment, the new rules may not protect against impacts on credit scores as a result of the short sale. The non-delinquent seller could take just as big a hit to their credit as a seller who was behind and sold short or gone into foreclosure prior to selling.

Apparently credit agencies have no special coding that indicates a short sale occurred without any delinquency. Consequently, homeowners could see their credit scores drop considerably after a short sale. The Federal Housing Finance Agency  (FHFA), which oversees Fannie Mae and Freddie Mac, claims to be “in discussions with the credit industry” exploring ways to fix the problem. Still, for some it may be the only way to move on or to get out from under a property that no longer fits into their lives.



Source: “Damage to Credit Scores Could Trip Up New Fannie, Freddie Short Sale Program,” Inman News (Oct. 23, 2012)

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