Monthly Archives: August 2012

Big Changes Coming For Short Sales

Short sales—long dreaded by many Buyers and Sellers alike for taking so long to conclude—may just actually become shorter, after all.

The Federal Housing Finance Agency has just announced new rules designed to speed up the Short Sale process.  In the Birmingham area, getting your home sold in a Short Sale can sometimes take 90 days or longer … but that time could wind up dropping in some cases.

Under the new guidelines, which take effect November 1st, if you own a home with a mortgage backed by either Fannie Mae or Freddie Mac, you’ll be able to sell your home in a Short Sale even if you are current on your payments, as long as you can prove a hardship.

The process of getting a Short Sale approved will be further streamlined, since, in some cases, mortgage servicers will no longer be required to gain additional approval from Fannie Mae or Freddie Mac.

Both entities will waive the right to pursue a deficiency judgement against borrowers who have sufficient income or assets if the borrower agrees to make a financial contribution or signs a promissory note.

If you have a second loan, the new rules authorize Fannie Mae and Freddie Mac to offer up to $6,000 to the second lien holder.  This may help speed up getting a Short Sale through, too, since—in the past—the process has sometimes been bogged down by second lien holders negotiating for higher settlements.

In addition, borrowers who serve in the U.S. military and who are being relocated will automatically be eligible for Short Sale approval, even if they are current on their mortgages.

The changes, backed by the National Association of Realtors, are expected to make Short Sales a more viable option for many home owners who otherwise might have faced defaulting on their loans and being Foreclosed.

Calera and Chelsea to Lose USDA Loan Coverage

If you’re thinking of buying a home in Shelby County’s Calera or Chelsea area and are planning on financing your purchase with a no-down-payment USDA loan, you better get moving with your purchase, because time may be about to run out.

As of October first, the USDA is expected to update the areas that qualify for its loans.  For Shelby Co., this means that Calera—which has long been a popular spot for home Buyers using USDA financing—will be dropped from the eligibility list.   Chelsea is also set to be dropped.

In Walker Co., Jasper will be dropped from USDA loan eligibility, as will Moody and Pell City in St. Clair Co., and Pleasant Grove in Jefferson Co.
In all, more than 90 communities will be removed from the list of qualifying areas.

The change in qualifying areas is not a 100% sure thing.  At least one U.S. Congressman—Republican Jeff Fortenberry of Nebraska—is pushing to get Congress to order a one year extension of USDA’s existing eligibility zones.  Others pushing USDA to grant an extension include the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association.

Why does USDA plan to change the zones?  The answer lies partly with the 2010 Census.   An existing grandfathering clause allowed any community considered ‘rural’ in 1990 to continue to be eligible for USDA funding until the 2010 Census, as long as it has a population below 25,000 and met other critera.  That clause, which was first enacted in 1990 and extended in 2000, is now set to expire.

So, unless Congress takes action, many communities that currently qualify for USDA financing will lose their eligibility—and for many of those areas, USDA loans are the only source of federal housing funding.

David