This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Housing Short Sales to Get Easier

NEW YORK ( TheStreet) -- Borrowers, servicers and real estate professionals may have an easier time doing short sales starting Thursday, with new servicer guidelines from Fannie Mae (FNMA) and Freddie Mac (FMCC) going into effect.

In a short sale, borrowers with underwater mortgages sell their homes to a buyer at a price that is approved by the lender. The lender normally forgives the difference between the loan and the sale proceeds- in essence, the bank is being shorted for the loan amount.

Under the new guidelines, borrowers with loans backed by the GSEs can do a short sale even if they are current on their payments if they have a "hardship" such as the death or disability of a co-borrower, illness, divorce or legal separation or distant transfer of employment.

Military personnel who are being transferred will be automatically eligible for short sales.

Homeowners can make a financial contribution at the closing of the sale to prevent the lender from pursuing the deficiency from the borrower later. Military personnel are under no obligation to contribute funds to cover the shortfall between the loan balance and the proceeds.

Servicers are required to respond to short sales within 30 days of receipt of the offer and communicate a final decision in 60 days.

Also, Fannie Mae and Freddie Mac on Wednesday entered into delegation agreements with nine mortgage insurers that will allow the agencies to approve short sales and deeds in lieu of foreclosure on behalf of the insurance companies. The agreements are expected to reduce the "potential costs, delay and uncertainty" involved in short sale process, the companies said.

Banks have increasingly shown a preference for short sales over foreclosures as a way of dealing with delinquent loans. Long foreclosure timelines, particularly in states where there is a judicial foreclosure process, has been one reason.

The national mortgage settlement with the biggest servicers this year also requires banks to pursue foreclosure alternatives.

According to the Settlement Monitor report, between March 1 and June 30, Bank of America (BAC - Get Report), JPMorgan Chase (JPM - Get Report), Citigroup (C - Get Report), Wells Fargo (WFC - Get Report) and Ally Financial processed short sales worth $8.6 billion, with Bank of America accounting for the lion's share of the amount at $4.8 billion.

--Written by Shanthi Bharatwaj in New York

>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to

>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FNMA $1.74 2.35%
BAC $14.77 1.44%
C $46.68 0.86%
JPM $63.79 0.93%
WFC $50.59 1.22%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs