Distressed sales are one of many factors contributing to low housing prices in America. To the relief of many, the Federal Housing Finance Authority (FHFA) has announced help for underwater mortgages in Los Angeles and the rest of the country. Effective November 1, guidelines for short sales on loans serviced by Fannie Mae and Freddie Mac will be standardized. More importantly, they will be streamlined. Both government sponsored entities were free to interpret the standards differently prior to the August 21 announcement.
Los Angeles short sale attorneys now have a number of tools that will allow them to better assist underwater borrowers. For instance, requirements of documentation demonstrating severe need of a short sale have been reduced or eliminated entirely. So if a pressing financial hardship has resulted in missed mortgage payments, a short sale attorney in Los Angeles or surrounding counties can rapidly transition the property into a short sale.
California borrowers seeking help for an underwater mortgage in Los Angeles or elsewhere should be comforted by the fact that state law protects them after a short sale. California Senate Bill 931 limits deficiency judgments to junior liens only. Further assistance is offered by FHFA’s announcement since both Fannie Mae and Freddie Mac can now permit deferment on any deficiency judgment. By signing a promissory note, a borrower can wait until their financial situation improves before making cash contributions to any junior lien holder they still owe.
Either government sponsored entity can also help speed the process now with additional funding. Second lien holders will be offered as much as $6,000 to stand down. Before, they were given little incentive to allow the short sale to close quickly. Second lien holders would often impede the process as they negotiated for a higher amount. A uniform amount should increase efficiency.
Fannie Mae and Freddie Mac both will be able to qualify borrowers who are current on their payments much more quickly than before. This may help limit any further damage to certain homeowner’s credit history.
Clearly, more homes that would have been in distressed sales will now be put on the market as short sales. This is an expected benefit to the overall economy. Short sales generally go at higher prices than distressed sales. Surrounding home values will likely benefit even if the impact on the average sale price in California is negligible.
Ultimately, less homes being added to the inventory of distressed properties can only help. As the housing sector continues to heat up, this news could contribute to the enthusiasm. Meanwhile, underwater homeowners can hold on to the payments they would’ve made to stay current. A knowledgeable short sale attorney in Los Angeles or anywhere in southern California should now be able to move qualified borrowers into a short sale quickly. The FHFA’s announcement for Fannie Mae and Freddie Mac borrowers couldn’t have come at a better time.
Oak Tree Law can help you understand the new short sale guidelines and how they pertain to your situation. Call today for our short sale expertise.