Fannie Mae Short Sale Guidelines

Seller’s Qualifications

When qualifying a seller, it’s important to review the financial information to determine whether or not the seller has experienced a verifiable hardship and loss of income or increase in living expenses. This information needs to be reviewed in order to proceed with a short sale:

• Current Proof of Income should not be older than 60 days for all sources:
• Pay stubs: Pay stubs must be legible and include the seller’s name and/or Social Security Number, pay dates, rate, and deductions.
• Profit and Loss: Must be for the last 90 days, signed, and dated by the preparer.
• Rental: Need a signed and dated letter from the renter or a lease agreement including payment frequency and amount.
• Non borrower income: If the non borrower is contributing to the household with his/her income, need a signed and dated letter stating how much is being contributed monthly from the non borrower.
• Child Support: Need a copy of the child support order or letter from the person paying child support that states the amount and how often it is paid.
  
  Need copies of three months worth of bank statements if direct deposited from the state disbursement unit.
• Social Security Income: Need current copy of award letter or if direct deposited.
• Reason for Default – You need a brief explanation indicating cause of delinquency. Verify the mortgagor had a decrease in income and/or increase in expenses that caused the delinquency.
  
  This can be a separate letter or on the space provided on the Financial Worksheet.
• Completed Financial Worksheet: Completed, signed, and dated by sellers.
  
  
  
• Credit Report: Must be pulled within the last 90 days.

Order Appraisal – When the appraisal is completed, you must complete three steps before the sellers are considered for a short sale.
            - Qualify the sellers
            - Qualify the property
            - Qualify the sales contract

Qualify the Seller(s)

The short sale negotiator will do the following:              

1. Calculate all qualifying income.
2. Verify the expenses on the Financial Worksheet.
   
   The reason for default is due to a verifiable increase in expenses or decrease in income.
         
3. If the expenses are greater than the income, proceed with qualifying the property.
   
   If the expenses are less than the income, the mortgagor may qualify for a retention option. Redirect the file to the FNMA Retention team. Also, if there is a positive cash flow you may want to ask the borrower to make cash contribution or sign a promissory note. 

Qualify the Property

Property may be occupied or vacant. Most Mortgage Insurers request 91% of the “as is” appraised value; FNMA requires 90% of the “as is” appraised value.

Qualify the Sales Contract

The short sale negotiator will do the following:              

1. Make sure the contract is executed by all parties.    
    
2. Counter the offer to the FMV Fair Market Value (appraised value).
   
   The contract must have a closing date. 
3. Have any “and/or assigned” clauses removed from the contract.
   
   “And/or assigned” clauses cannot be included in the sales contract. This clause means they can place the deed in someone’s name other than the listed buyers which could violate HUD’s Arm’s Length Policy.    
4. Have the contract addendum and listing addendum signed by all parties. 

HUD 1 or Net Sheet

The short sale negotiator will:

1. Verify all seller closing costs are normal and customary.

2.      Realtor commissions do not exceed 6 percent of the sales price.(6% if 2 realtors are involved; 3% if 1 realtor is involved)

3. Sales price on the HUDI matches the sales contract.
4. The net proceeds are at least 90 percent of the appraised value & 91% for most Mi Co.

Cost Analysis

The short sale negotiator will:

1.       Verify outstanding foreclosure fees and cost.  

2. Run the cost analysis (Be sure to include the outstanding foreclosure attorney fees & costs & the appraisal fee). Submit the presale through HSSN to obtain approval on non-delegated deals. Wait to obtain approval from the investor & Mortgage insurance Company before issuing out the approval letter. 

Issue an Approval

The short sale negotiator will:       

1. Make sure the Approval letter contains the following:

·         The buyer(s) and seller(s) names on it.

·         The date of the sales contract.

·         The estimated closing date.

·         The approved closing costs.  

Steps to Follow Prior to Closing

The Title Company or closing attorney will need to provide the estimated final HUD - for approval.

The short sale negotiator will…               

1. Fax/email the approved HUD I and Attachment F back to the closing title company or closing attorney. 
2. Complete Attachment G. 

Steps to Follow After Closing

The short sale negotiator will:    

1. Verify they have received the net proceeds check, HUD-I signed by all parties.   
2. Make sure the proceeds check and the net amount on the HUDI match or funds wired confirmation. 
3. Make sure the disbursement date on the HUD1 matches the check date.    
4. Forward the complete file to Settlement along with the Settlement Checklist.   

Removals/Denials

The mortgagor(s) may be terminated from the Pre Sale program for the following reasons.

·         Un-resolvable title issues.

·         The seller(s) did not market the property at Fair market value obtain an offer.

·         Voluntary withdrawal by the seller(s).

December 17, 2010 at 8:11 AM Posted by Mo Choumil