Fannie Mae Delinquency Policy?

[smitheroosky]

First and the obvious... fantastic forum and great information. Now that the sucking up is complete, I have a couple of questions regarding Fannie Mae requirements that I'm hoping somebody might be able to help with since their hotline numbers are closed until Monday.

I'm attempting a short sale on my townhouse and actually received approval from Wells Fargo (fortunately only one conventional loan, but roughly 100K upside down). Everything went super-smooth until they threw me a curveball at the last second and stated that Fannie policy required that I could not close until I was at least 30 days delinquent (I am current on all payments). This causes a problem because they told me this on July 2 (of course, one day after I could have skipped the July payment), meaning that with grace periods I will not be delinquent until mid-September. This date goes beyond the approval-closing window meaning the process has to start from the beginning, including BPOs. This is obviously making my buyer consider backing out.

So here's the question... is this an actual Fannie policy? My agent and I have spent hours online and cannot find anything to support that this is an actual requirement. I realize the vast majority of short sales are delinquent, but if it is possible to get this closed and hopefully save my credit a point or two, I obviously want to do everything I can to make that happen. In addition, the FAQ publication Fannie disseminated on 8/13/08 clearly states that a short sale can be on a current mortgage (Q6), so it seems odd that Fannie would define a short sale as such but then turn around and require delinquency and basically invalidate their own definition. My agent and I have also talked to numerous other brokers and lenders that have never heard of this policy, and I've read a few accounts on this forum that people have closed while current. Is my negotiator blowing smoke?

Second, the same FAQ document from Fannie references the excessive prior mortgage delinquency policy (question 7). I haven't been able to find this policy, so if somebody could point me to it that would be fantastic as I would really like to read it.

Thanks for taking the time to read this and help everybody going through these stressful issues.

Dave

[Moe Bedard]

Hello and thanks for sharing your short sale story!

Well, the facts are that there are no real guidelines for most any lenders or mortgage servicer for the public or even non-profits or professionals to follow. But rather internal policies and procedures that are somewhat secret so people do not game the system. The policies and procedures of loss mitigation which is in charge of short sales and loan modifications operate on the basic premise of protecting their bottom line by preventing loss.

When you are not late, you are not considered a "loss risk" and most likely internally flagged as such.

Remember that this is business and they have a lot of borrowers not paying and if they allowed everyone who was not late to get a loan mod or short sale, then they would be out of business fast.

[smitheroosky]

Thanks for the quick response, Moe. Completely understand it is a business and in all honesty when I applied for the short sale I pretty much expected them to laugh it off and give me a "silly rabbit, trix are for kids" type of reply. As crazy as it sounds, working with Wells was almost a pleasure... timely communication, friendly associates, and even the ability to listen to reason when one of the BPOs came back at unrealistic values. That's why hearing about the delinquency requirement at the last possible second was so surprising, especially since they claim it is FM that imposes it yet I can't validate that anywhere. And it seems kind of silly for them to go all the way through the process and end it like this. Since the sale was approved, all this accomplishes is to actually make themselves lose an additional $1450 by forcing me to miss a payment. Granting a short sale to a current person may not be smart business, but that's just plain dumb. I was just curious if you know if this actually was a FM requirement or if anybody else reading who were actually allowed to close while current had any insight on what they experienced. Thanks again and have a good one.

Dave

[triarri]

Dave,

I am experiencing the same issue as you with Wells Fargo and Fannie Mae...after making my last payment I am informed they will not consider my short sale unless I go delinquent. I had to relocate out of state for work and we all know that property has been devalued. I accepted a short sale offer so I could sell my current property and purchase a new one in my new location. From what it appears we have no forum or means to get Fannie Mae to change their internal policy that is only hurting homeowners not helping them.

Larry

[smitheroosky]

Larry... If you didn't know already, here's something you need to keep in mind that I just recently found out... Because of this requirement I skipped my August payment and thought that I would be considered delinquent as of Sept 1, or the 15th at the latest with a grace period. However, Wells feels like as long as you make your payment by the end of the month you are good to go. So even though I haven't made a payment since 1 July, I won't be 30 days delinquent until 1 October (of course meaning I probably can't close until late October, early November by the time they go through the process again). Great idea for those trying to stay in their homes, but it stinks for us that need to move on and close the sale. Just make sure you factor that into your timelines.

Dave

[triarri]

Dave,

Thanks for the additional info. I have asked for some Congressional intervention in the process, doubt they will care. The policy needs to be clearly stated and changed so that you don't have to be delinquent first if you have an offer on the property.

Larry

[smitheroosky]

Completely agree... if you do get any kind of a response, have them think of it in these terms which hits home a little more than just the problems of Dave and Larry... Active duty military personnel often get transferred and moved every three years or so. So, for those who moved back in 2006 when the prices were astronomical, if they need to move now for their next duty station they will be in short sale situations. "Thanks for serving your country, in return you get screwed up credit and can't buy a house for two years." There needs to be some kind of delineation to help people that did nothing wrong except to simply buy at the wrong time and are going throug life changes like job transfers or growing families, etc.. Good luck with your sale.

[triarri]

Dave,

Actually the government has enacted legislation for Active Duty and Government Civilians who PCS or must change locations because of the base closure actions. If they purchased a home before a certain date the government will buy their house and sell it for them so they do not need to worry about paying on two homes. It is those who are not authorized a relocation allowance or who fall under the current government legislation who are left out in this housing mess.

Larry

[Eyebolt]

Dave,

I had the same exact issue (starting in july as well actually). I had to move across the state for a new job (laid off from old one)...and we just bought our place in 2005...so needless to say, it's not worth what it used to be. Had the place up on the market since January when in June we decided we would have to do a short sale and priced as such. Not knowing about the fact that we couldn't be current to do a short sale...I made my july payment.

Mid-July...we receive 2 offers within a week. They're both pretty close to each other except one had 20% to put down. We get everything turned in to GMAC and they eventually come back saying that the "investor" (mortgage owned by Fannie Mae) won't entertain a short sale on a current loan. I was trying to do the same thing and save some points on my credit. So August 1st comes, and I don't pay my mortgage. Loss Mitigation says to call back in mid-august and we can start moving forward. The day we were to call back and get things moving...one of the offers (the one with 20%) had to back out because the couple had both gotten laid off. Within another week we got another offer..got it submitted...I became officially delinquent for GMAC Sept 1...a week later they accepted an offer and I just might close by Sept 30th to keep from being 60 days delinquent.