The collapse of the housing market in 2008 put home values into a tailspin from which many parts of the country have not yet recovered. Many homeowners discovered that they owed more on their mortgage debt to the bank than their home was currently worth. Homeowners who could not stay current with the mortgage payments resorted to a short sale to avoid a home foreclosure.
A short sale is occurs when a home is sold for less than is owed on the existing mortgage. The bank that holds the mortgage must agree to accept less than the balance owed for the sale to be completed.
The Federal Housing Finance Agency recently announced that Freddie Mac and Fannie Mae, two government-owned companies that purchase mortgages, would be implementing new guidelines to streamline the short sale process for homeowners. The guidelines are effective Nov. 1.
The new guidelines will make the short sale process easier for homeowners, particularly for those homeowners who are not in arrears in their mortgage payments. For those homeowners who are behind in payments to their mortgage lender, the new guidelines reduce or eliminate the documentation necessary to prove need.
Financial challenges caused by unemployment, family obligations or medical issues can cause a person to become delinquent in making monthly mortgage payments. For many of those people, selling their home under a short sale may not be an option, even with new guidelines in place. Filing for bankruptcy will stop a home foreclosure. Homeowners who are behind on payments to their mortgage lender should can with a bankruptcy attorney who can discuss all options that are available to stop foreclosure and work to resolve financial challenges.
Source: CBS Money Watch, "Feds move to speed home 'short sales,'" Ilyce Glink, Aug. 21, 2012
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