FANNIE MAE CHANGES MORTGAGE ELIGIBILITY RULES AFTER SHORT SALE AND DEED IN LIEU

By Cassell von Bayer, Attorney, Incline Law Group

One of often cited selling points for homeowners to undertake a short sale rather than a foreclosure sale is the ability to purchase a new home with financing in a shorter period of time. While all lenders have different eligibility requirements, most lenders current guidelines fall within a 2 to 5 year waiting period after a short sale or deed in lieu of foreclosure. While FHA guidelines may allow a borrower to obtain a new mortgage within one year of a short sale, those guidelines provide for several restrictions and FHA loans require significant and very costly mortgage insurance premiums.

Fannie Mae continues to be one of the largest mortgage holders and has up until now provided borrowers with mortgage eligibility two years after a short sale. Aside from FHA and VA loans, Fannie Mae has maintained the shortest wait periods after a derogatory credit event such as short sale or foreclosure. As of August 16, 2014 that will change. For all loan applications taken on or after August 16, 2014, Fannie Mae will impose a four year waiting period after a short sale and seven year waiting period after a foreclosure sale. Equally as important, for loan applications taken before August 16, 2014, the lender must document that the short sale or deed in lieu was completed two or more years from the disbursement date of the new loan. Similarly, where your credit report shows a “charge off”, meaning a lender, such as a second mortgage holder after a short sale, has reported the account charged off for accounting purposes, borrower’s may be subject to a four year waiting period. The new rules were issued on June 17, 2014, and as noted go into effect August 16, 2014. For the specifics please see: https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

It is difficult to imagine that these new restrictions will aid the housing recovery or the reconstitution of the American Dream.

Cassell von Baeyer

Cassell von Baeyer is a partner at the Incline Law Group, LLP. Incline Law Group, LLP - Providing Legal Clarity for Over 40 Years Incline Law Group, LLP, is committed to providing legal clarity. Our transparent approach to delivering legal services is designed to get beneath the surface of the matter in order to minimize surprises and maximize our clients’ outcomes. Founded in 1973 by John C. Rogers, Incline Law Group has earned a reputation for professionalism, discretion, honesty, diligence and positive results. Our attorneys are licensed in Nevada and California and have been providing legal clarity in the areas of Real Estate, Litigation, Family Law, Contracts, Business Formation and Estate Planning for over 40 years to our Northern Nevada and California communities. Cassell has been practicing law for 16 years and is licensed to practice in all courts of California and Nevada. Cassell's areas of practice include: -Real Estate transactions (commercial and residential) -Purchase and sale of real property -Commerce development -Common interest community developments and homeowner's association matters -Commercial development -Leases -Easements -Construction contracts -Mechanics liens -Land use -Distressed real estate, including judicial foreclosure -Business Entities and Transactions - formation and administration of business entities -Contracts -Real property -Business -Licensing agreements -Construction Cassell is a member of The State Bar of Nevada, The State Bar of California and the Washoe County Bar Association.

Leave a Reply

Your email address will not be published. Required fields are marked *

Call Now Button