In an effort to hasten the process of short selling homes, Fannie Mae has launched a pilot program in two of the country's hardest hit areas, according to a report in The Wall Street Journal.
The program, in its first of three months in Phoenix, Arizona and Orlando, Florida, will pre-approve selling prices for homes in danger of foreclosure.
Lenders will sometimes allow homeowners to sell their property for less than the balance of their mortgage and forgive the remaining debt when the alternative is a greater loss from an expensive foreclosure.
As foreclosure rates increased, short sales were seen as a viable option to minimized lenders' losses and help homeowners get out of homes they couldn't afford quickly. But many attempts at short sales fail because lenders and servicers would reject the sales price agreed upon by the buyer and seller, or deals fell through because they took too long to get approved.
“Short sales have received such a bad reputation among real-estate agents that, as a portion of the overall mortgage market, they have gone down,” Tom Popik, a survey director for research firm Campbell Communications, told the Journal. “We hear a lot of people say, 'I'm tired of doing them. They've been a nightmare.'”
In an effort to hasten the process of short selling homes, Fannie Mae has launched a pilot program in two of the country's hardest hit areas, according to a report in The Wall Street Journal.
The program, in its first of three months in Phoenix, Arizona and Orlando, Florida, will pre-approve selling prices for homes in danger of foreclosure.
Lenders will sometimes allow homeowners to sell their property for less than the balance of their mortgage and forgive the remaining debt when the alternative is a greater loss from an expensive foreclosure.
As foreclosure rates increased, short sales were seen as a viable option to minimized lenders' losses and help homeowners get out of homes they couldn't afford quickly. But many attempts at short sales fail because lenders and servicers would reject the sales price agreed upon by the buyer and seller, or deals fell through because they took too long to get approved.
“Short sales have received such a bad reputation among real-estate agents that, as a portion of the overall mortgage market, they have gone down,” Tom Popik, a survey director for research firm Campbell Communications, told the Journal. “We hear a lot of people say, 'I'm tired of doing them. They've been a nightmare.'”
The average wait time to get approval of a short sale nearly doubled to more than eight weeks, according to a real estate agent survey Campbell conducted in November.
In the new program, Fannie Mae agrees on a price for a home, and how much of a loss it will take on the sale before the buyer is found. The program is open to homeowners who have Fannie Mae mortgages serviced by Bank of America's Countrywide Financial Corp. subsidiary, and are already listed for less than the remaining balance of the mortgage.
“Fannie Mae's goal is to make the short-sale process as fast as possible for homeowners in financial distress,” in order to ensure a “graceful exit strategy for homeowners,” Kevin Brungardt, Fannie Mae's vice president for servicing management, told the Journal.
While lenders still lose money on short sales, the story cites an analysis by Clayton Holdings Inc. that shows the average loss from a short sale is 19 percent, compared to the average 40 percent loss from a foreclosure sale.
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