FANNIE MAE’s “Blacklist” on Short Sellers.
Why are lenders targeting strategic defaulters? Is it because they are educated and making good decisions for their families welfare? Did you know that the short sale rate of the “rich” is at a 50% higher rate than that of the “non – rich”! Ok. That tells you something. The New York Times published an article on this recently.
If you are having trouble making ends meet. If you need mobility for the sake of your job or family and cannot sell. What are you to do? Rent the home out and lose 30% a month and then hope it eventually goes up in value? What are the consequences to a short sale?
I get this phone call and this question from homeowners weighing these stressful trade offs very often.
Trouble is that Fannie Mae has a one size fits all policy – imposing a strict penalty on potential borrowers who have undergone a short sale or a foreclosure. Fannie Mae (in 2008) extended their 4 year “blacklist” period to 5 years saying, “the presence of a prior foreclosure action in the borrower’s credit history is evidence of significant derogatory credit and increases the likelihood of future default. The lender should consider the presence of a foreclosure as an added risk element that represents a significantly higher level of default risk. The greater the number of such incidences and the more recently they occurred, the higher the credit risk.” Read more on this at the following blog www.bayarearealestatetrends.com/2009/10/stop-blacklisting-strategic-defaulters
Literally there are really good reasons for default, here are just 3:
1. To move for a job opportunity when one is unemployed
2. To move due to healthy reasons (ie. stairs, elderly)
3. To move due to a loss of equity and inability to make payments (economic reasons)
This is something we need to change. There should be categorization for “legitimate” short selling. The National Assocication Of Realtors should get into lobbying on this. You would think opening the pool of buyers again would be in everyone’s interest as well.
Under the current Fannie Mae guidelines, the timeframe to buy again on the best “conforming” loan terms would hold a buyer off from buying on the best terms until 2015.
So when you go to short sale, if you do, you need to take all the variables into consideration. Will you be able to rent for that time and/or buy with a co-signor etc.
If you need help in reviewing your options please give me a call. I and the legal counsel I associate with can help you if your family is in need of a sober look at the business of your loan. We can help you STOP foreclosure action. We can stand up for your rights.