Fannie Mae Shortens Wait Period for Re-Purchases by Short Sale Sellers - CNBC
Fannie Mae Shortens Wait Period for Re-Purchases by Short Sale Sellers
Published: Monday, 19 Apr 2010 | 3:01 PM ETBy: Diana Olick
CNBC Real Estate ReporterSome argue that a constant political obsession with the "ownership society" is what pushed this nation into the current housing disaster. Going back decades, presidents have pushed it and Congress, in turn, has helped open the financial doors to it.
The question now, as we scrape together what's left of our economic faith and investing gumption, is: Should we continue to push borderline borrowers into home ownership?
The answer, at Fannie Mae at least, appears to be yes. The mortgage giant is offering troubled borrowers who opt to do short sales (sell their homes for less than the value of the mortgage) or deeds in lieu of foreclosure (essentially just hand the keys over to the bank) the chance to get back into home ownership more quickly. Two years sooner, in fact.
Originally, if you did either of the above methods to get out of a home/mortgage you couldn't afford, Fannie Mae would not clear you to get a new loan to buy another home for 4 years.
According to a notice sent to Fannie's lenders/servicers, they are shrinking that waiting period by two years "to support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their debt." In order to qualify for the new loan, though, the borrower must put 20 percent down.
Commentary:
Interesting change from Fannie Mae that although it sounds appealing - a reduction in the wait time before a new mortgage can be obtained if a homeowner completes a short sale or deed in lieu of foreclosure - from 4 years to 2 years for homeowners - the reality is that in the Saint Louis housing market, this change will have a very limited effect.
73% of contracts obtained from buyers in the first quarter were below $300K and the vast majority of them were completed with home buyers in St Louis using FHA financing. The second challenge is the requirement for a 20% down payment.
We do believe the announcement will provide additional interest from distressed homeowners in the Saint Louis market who are looking to complete a short sale on their St Louis home - especially above $300K - where the supply demand imbalance is more negative.
As we've noted previously, we are in fact seeing an increase in short sales above $300K and especially above $525K due to excess supply and limited demand in each successive higher price range.
