Fannie Mae and Freddie Mac Set New Short Sale Timelines

Originally Published: 5/26/2012

Please note that we have been advised that starting June 15, the Federal Housing Finance Agency has indicated that it will require Fannie Mae and Freddie Mac to give a final short sale decision within 60 days. Fannie and Freddie must also respond to initial requests for a short sale within 30 days of receiving the submission.

Please view this news with some degree of skepticism, as you should with any federally “mandated” program. For example, the clock only starts ticking (a) for HAFA programs when the borrower submits a completed package requesting consideration of a short sale, and (b) for a traditional short sale when the borrower submits a short sale offer from a potential buyer and a completed package. (The Servicing Guide Announcement can be found here.  Servicer response timelines can be found here.)

As you can imagine, how a lender defines a “completed” short sale package can vary tremendously, and lenders often use the excuse of an “incomplete” short sale package as a justification to extend other promised time frames.

These new guidelines are designed to speed up the short sale process, but we question if these time-frames are achievable.  Currently, based upon our experience, the average time-frame for short sale approval is approximately 3 to 4 months. Are lenders really staffed to immediately reduce this window by almost fifty percent?

Additionally, there does not seem to be any type of penalty, sanction, or repercussion for missing these time frames, something that is generally missing from other failed attempts to speed up or otherwise encourage short sales.

And our preliminary impressions are that lenders are struggling with this mightily.

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