Effective Today Fannie & Freddie Get a Green Light to Save You Another Step

Fannie Mae Reaches Short Sale and Deed-in-Lieu Delegation Agreements with Mortgage Insurers

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced today that it has reached delegation agreements with all of its mortgage insurer counter parties so that servicers can complete short sales and deeds-in-lieu of foreclosure without seeking approval from the insurer.  These agreements will further streamline the foreclosure prevention process and allow short sales and deeds-in-lieu to be completed more efficiently.

“Short sales and deeds-in-lieu are important tools to prevent foreclosures and help struggling borrowers,” said Leslie Peeler, senior vice president, National Servicing Organization, Fannie Mae. “These delegation agreements create an even more streamlined process that will ultimately help more families avoid the costly effects of foreclosure and benefit taxpayers.  We are pleased that the mortgage insurance companies have stepped up to the plate with us to help more homeowners.”

Previously, Fannie Mae had individual delegation agreements with the majority of its top mortgage insurer counterparties.  Now, a standard delegation agreement has been reached with all nine mortgage insurers, making the approval process more consistent and efficient for servicers and borrowers.

The new delegation agreements allow servicers to approve any short sale or deed-in-lieu that meets Fannie Mae’s requirements without individual mortgage insurance approval.

These agreements are an important achievement in Fannie Mae’s efforts to stabilize neighborhoods and have been established with CMG Mortgage Insurance Company, Essent Guaranty, Inc., Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, PMI Mortgage Insurance Co., Radian Guaranty Inc., Republic Mortgage Insurance Company, Triad Guaranty Insurance Corporation, and United Guaranty Mortgage Insurance Company.  All delegation agreements will be effective as of November 1, 2012.

Borrowers can visit http://www.knowyouroptions.com/ for foreclosure prevention information and resources, including how to contact Fannie Mae’s twelve Mortgage Help Centers across the country.  Through the first six months of 2012, Fannie Mae completed 142,987 loan workout solutions, including 46,226 short sales and 7,509 deeds-in-lieu of foreclosure.  Earlier this year, Fannie Mae announced new short sale guidelines and new short sale timelines.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

via News Release – Fannie Mae Reaches Short Sale and Deed-in-Lieu Delegation Agreements with Mortgage Insurers | Fannie Mae.

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Why Would a Bank Accept a Short Sale?

Why Would a Bank Accept a Short Sale?

The easiest way to demonstrate why a bank will negotiate a short sale is to break down the costs of a foreclosure on a hypothetical property, one a short sale and the other a foreclosure.

The average cost of processing a foreclosure is between $40,000 & $50,000 for the bank before they ever bring the house to the market and pay the additional costs listed here.  That is why banks are moving increasingly towards Short Sales.

Say the property has a current value of $200K and the owner owes the bank $225K. But, the best offer to come in is for $190K.  The bank would be foolish to accept it, won’t they?  Maybe not.  Let’s go through the numbers.

Short Sale:

Market Value $200,000
Loan amount $225,000
Sale Price $190,000
Closing Costs @ 2.25%    -$4,275
Commissions @ 6%  -$11,400
Proceeds from sale $175,325
Loan Amount  $225,000
Less Proceeds -$175,325
Short Sale Lender Loss    $49,675
Loss Percentage      22.07%

Foreclosure on the Same Property:  

Market Value $200,000
Loan Amount $225,000
Sale Price $175,000
Legal Fees    -$7,000
Taxes       -$500
Insurance    -$1,000
6 Months Utilities       -$400
6 Months Maintenance       -$800
6 Months Interest Loss    -$6,650
Association Dues    -$1,200
Staffing Costs (Servicing Dept.)    -$2,000
Closing Costs @ 2.25%    -$4,275
Commissions @ 6%  -$11,400
Proceeds from sale $139,775
Loan Amount  $225,000
Less Proceeds -$139,775
Foreclosure Lender Loss   $85,225
Loss Percentage     37.87%