Aligned Short Sale Requirements in Guide Bulletin 2012-16
August 21, 2012
To make the short sale process easier and quicker for you, homeowners, home buyers, and others involved in a short sale transaction, we are announcing the Freddie Mac Standard Short Sale and the Freddie Mac proprietary Obtain Valuation functionality. Announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-16, the Standard Short Sale was developed as part of the joint-GSE Servicing Alignment Initiative and completed under the direction of the Federal Housing Finance Agency.
New Short Sale Requirements
The requirements for the Standard Short Sale are effective for new borrower evaluations conducted on or after November 1, 2012. The requirements offer an expedited process to assist distressed homeowners with a short sale as an option to avoid foreclosure through:
- Efficient decisioning: All Freddie Mac Servicers have delegated authority to approve most short sale transactions. This delegated authority eliminates additional steps for you when working directly with homeowners and home buyers.
- Defined eligibility: All single-family property types are eligible, including investment properties and second homes for homeowners who are 31 days or more delinquent, regardless of occupancy status. In addition, borrowers who are current or less than 31 days delinquent are eligible, provided they meet certain requirements. This allows you to consider additional borrowers for a short sale as a loss mitigation alternative.
- Revisions to list of hardships: The list revises common hardship types and qualifications so Servicers have delegated authority to approve borrowers who are current or less than 31 days delinquent when their hardship is death, divorce, long-term or permanent disability, and distant employment transfer, including service members who receive Permanent Change of Station orders. As noted in today's Guide Bulletin, the hardship updates apply to the Standard Short Sale and all other Freddie Mac loss mitigation options, including the Home Affordable Modification program (HAMP) and the Freddie Mac Standard Modification.
- Special assistance for service members: Our requirements provide greater flexibility for eligible service members with Permanent Change of Station orders seeking a short sale, including no requirement for debt payment-to-income ratio and no requirement for a cash or promissory note contribution to close a short sale transaction, if the property is the borrower's primary residence and was purchased prior to June 30, 2012.
The updates in Guide Bulletin 2012-16 include additional short sale requirements changes for borrower solicitation, documentation requirements, relocation assistance for borrowers, and special considerations to assist service members. It is important that you thoroughly review the Guide Bulletin to obtain additional information on these important components.
Additionally, you should read our short sale operational and reporting requirements in the Single-Family News Center article.
New Obtain Valuation Functionality
A key component of implementing the Standard Short Sale, our proprietary Obtain Valuation functionality, will be available in the Freddie Mac Service Loans application November 1, 2012. All Servicers can register to gain access to the functionality immediately by visiting the Service Loans Application Resource Center, and completing and submitting the appropriate forms.
With this functionality, you will have access to an automated valuation tool that:
- Returns an estimated market value of the property that can be given solely as guidance to the borrower and real estate broker to assist them in setting the sale price.
- Provides a minimum net proceeds amount, which is the minimum amount that Freddie Mac will accept upon closing.
- Replaces the need to request a Broker's Price Opinion through Freddie Mac BPOdirect® for short sales when evaluating borrowers who are 31 days or more delinquent.
Get more details on the Obtain Valuation functionality in the Single-Family News Center article, including how to obtain property valuations for borrowers who are current or less than 31 days delinquent.
As a result of the comprehensive revisions to our current short sale requirements, Freddie Mac's implementation of the Home Affordable Foreclosure Alternative (HAFA) initiative will end on December 31, 2012, the original program expiration date. Today's Guide Bulletin also includes important information about new Freddie Mac requirements for deeds in lieu of foreclosure and reinforces our previously announced requirements for extending HAMP through December 31, 2013. Get more information in our Single-Family News Center article.
It is important to also read today's Guide Bulletin on the increase in Freddie Mac's limits for foreclosure attorney fees for active judicial foreclosure referrals in Oregon.
Get More Information
- Read Guide Bulletin 2012-16.
- Register for our new instructor-led Standard Short Sale webinar for Servicers.
- Visit the new Standard Short Sale Web page.
- Read details on the Standard Short Sale closing, reporting, and remitting operational changes for Servicers.
- Learn about HAMP and HAFA, eligible hardships, borrower documentation, and special assistance for service members.
- Find out about the new Obtain Valuation functionality, which will be available in the Service Loans application in the coming months.