Fannie Mae’s incompetence causing more foreclosures, not less
By William D. Tucker, III
Tucker Griffin Barnes P.C.
FannieMae asan investor owns more and more troubled loans. As the investor, Fannie Mae is “calling the shots” whether a propertycan be sold as a short sale or is going to foreclosure. Their public policy statement on theirwebsite states Fannie Mae is “helping families prevent foreclosures,” butrecent practices in the short sale market place result in the opposite. In other words, Fannie Mae’s actual practicesand guidelines submitted to their loan servicers are resulting in moreforeclosures.
Hereare some recent trends observed with Fannie Mae and attempted Short Sales:
1. Fannie Mae loans are being foreclosed on muchsooner than other conventional and government loans. (For example, in the last several months, weare aware of two Fannie Mae foreclosures in our local market where the Borrowerwas only four months behind.) MostLenders allow a much longer delinquency period before a foreclosure.
2. Once a foreclosure is started it is practicallyimpossible to postpone due to recent Fannie Mae Guidelines. Most Lenderswill postpone a foreclosure to allow sufficient time to review the short salecontract. These alleged Fannie Mae guidelines,which are different from loan servicer to loan servicer, are outlined below:
A. A ratified contract has to be submitted to the Short Sale Lender priorto thirty days before a scheduled foreclosure, or
B. The completed Short Sale Package has to be submitted to Fannie Maewithin ten days prior to the scheduled foreclosure date, or
C. Fannie Mae has to approve the short sale within ten days (or accordingto another negotiator within three business days) of the scheduled foreclosure.
3. Another important trend with Fannie Mae istheir policy of no longer releasing the deficiency for the Short Sale Seller aspart of the Short Sale approval. TheBorrower is losing their house and being forced to move as a result of theirhardship (lost job, divorce, illness, etc.) Now with this practice, the Borrower is uncertain as to whether therewill be any future collection activities on the deficiency. Most Lenders will waive the deficiencyentirely or waive it for a minimal cash contribution.
Unofficially,the loan servicers are saying Fannie Mae will probably not attempt to collectthe deficiency. But legally in Virginiathere is a five year statute of limitations from date of default. The Borrower has already suffered enough andusually has no money to pay the deficiency.
Insummary, Fannie Mae needs to change their actual behind the scene practices andguidelines. They need to adhere to theirstated policy of “helping families prevent foreclosures.” Each foreclosure that can be prevented with ashort sale is one less house to depress the local housing market.
PS—If these trends or guidelines continue, Fannie Mae borrowers are in for a roughtime with trying to short sale their underwater properties.
PSS—Andon top of all this, taxpayer money is being used to bail out Fannie Mae. Where’s Congress when we need them? What a mess!!