June 28th, 2012
New Frannie Mae and Freddie Mac policies will make it easier for military homeowners to short sale their homes when they must move because of a change in station. The Federal Housing Finance Agency announced June 21 that Fannie Mae and Freddie Mac will no longer be permitted to pursue a deficiency judgment, promissory note or any cash contribution from members of the military who have negotiated a short sale for their home.
In Portland, short sales have taken off this year, and with recent federal regulations that have sped up the short sale process, more and more people are choosing this foreclosure alternative. In 2011, short sales made up 11% of all Portland home sales, up 2% from the year before. Prior to 2010, there is no RMLS data on short sales because they were practically unheard of.
Since the housing bubble burst in 2009 and many mortgage holders found themselves unable to make payments, short sales became a popular way for homeowners to avoid foreclosure. Short sales allow homeowners who are underwater on their mortgage – meaning they owe more than the home is worth – to sell their home for market value. The number of short sales is expected to continue to grow, especially as lenders and governing agencies change the rules to facilitate the process.
The latest rule change coming from the Federal Housing Finance Agency prevents Frannie Mae and Freddie Mac from pursuing deficiency judgments and promissory notes from military homeowners negotiating a short sale. These legal actions are ways for lenders to regain the difference between what homeowners owe on their mortgage and the short sale price, which can cause further financial hardship for the homeowner.
According to the Federal Housing Finance Agency, a change in station often creates hardships on military homeowners, especially those who are underwater on their mortgages. Previously, many service members felt their only option was either to maintain financial obligations on two residences or to default on their mortgage.
The new regulations will make short selling an option for more military homeowners, helping them remain financially afloat while moving those homes directly into the hands of new owners, instead of allowing them to remain bank-owned.
Short sales can be a good option for those seeking to buy a Portland home as well, but negotiating these sales is much more complex because the lender holding the mortgage must approve the transaction. Buyers should always seek the assistance of a Portland real estate agent with experience negotiating short sales.