Recently we had been advised that Fannie Mae and Freddie Mac would no longer be considering short sales on properties that were still within the redemption period.
A number of emails were forwarded to me, all with the same basic message: "Freddie Mac is no longer reviewing offers on redemption properties. I would advise you or the seller or both of you to call Freddie Mac to voice your concerns over this issue".
Since then, the Michigan Association of Realtors (MAR) sent out the following email:
"UPDATE: Freddie Mac Short Sale Cancellations
Recently, the Michigan Association of REALTORS® participated in a conference call with representatives from the National Association of REALTORS®, Freddie Mac, and other interested parties regarding Freddie Mac’s new policy affecting short sales during the redemption period.
In short, this situation was all an unintended consequence of a policy change under the Freddie bulletin issued on March 13th and scheduled to take effect on June 1st. If a rollback takes place (taken out of foreclosure) for any number of reasons, including lender mistake, the rollback "compensatory fee" of $1,000 could be charged to the servicer where the lender foreclosed without using other means of resolving the situation. Some servicers interpreted that fee to include a short sale where the borrower was foreclosed upon and then redeemed through a short sale.
Freddie is now reviewing these situations on a case by case basis and working to resolve the current situations, and then deal with the redemption issue as a whole. To deal with immediate concerns, there are account teams going back to the servicers who have changed their policies since the bulletin was issued on March 13th. Freddie has reached out and is trying to go back individually-as soon as possible. In the meantime, it is recommended that REALTORS® should get back in contact with the lenders that cancelled the short sales, citing Freddie's policy change and tell any lenders that they are still being considered on a case by case basis. Where MAR members meet resistance from the lender to reinstate, we have been asked to take each case to Freddie on their (800)-FREDDIE number and press option "2" and mention "short-sales during the redemption period" and the name Dan Smith."
Hopefully, this issue has been resolved going forward. On average, it still takes far too long for lenders and services to process short sales. If we lose the valuable time offered by working through the redemption period, it will become very difficult for short sales to be approved in the required timeframe – especially, if the lender requires the borrower to be delinquent first!
I’m happy to see MAR and the National Association of Realtors (NAR) taking the fight to Fannie & Freddie on this, keep it up!
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