Fannie Mae Short Sale: Improving the Short Sale Experience. May 2013

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Timothy Warren
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1 Fannie Mae Short Sale: Improving the Short Sale Experience May Fannie 2013 Fannie Mae Mae 1

2 What does Fannie Mae know about real estate? Fannie Mae has extensive experience valuing and negotiating real estate transactions. Since 2007, Fannie Mae was the investor on over 250,000 short sales transactions and sold almost 850,000 foreclosed properties 1 Fannie Mae recognizes the important role real estate professionals play in the short sale process We are committed to improving transparency throughout the entire short sale process We are actively working with agents on real estate transactions in virtually every market, every day through

3 We can all agree, short sales Continue to represent a significant portion of the real estate market Are frequently viewed by real estate professionals as the least desirable type of transaction Can be frustrating because process is complex, inconsistent, slow and cumbersome We hear you! 3

4 Here s what we re doing Created a dedicated short sales team within Fannie Mae (late 2012) Fannie Mae introduced an expanded escalation ability to help resolve short sale challenges (January 2013) Fannie Mae now uses appraisals in addition to BPOs on all short sale valuations (April 1, 2013) Fannie Mae redesigns HomePathforShortSales.com to make the short sale experience more transparent for listing agents and their clients who are pursuing a Fannie Mae short sale (early June 2013) Starting in early June 2013: Fannie Mae will request that listing agents register accepted offers with Fannie Mae when they submit the offer to the servicer Registering the offer allows us to proactively work with the mortgage servicer to facilitate faster communications and decisions 4

5 What agents should expect with a Fannie Mae Standard Short Sale Policy announced in late 2012 guides our process for a Standard Short Sale with Fannie Mae Applies to all mortgage loans owned or guaranteed by Fannie Mae To determine if Fannie Mae owns a loan, go to the Fannie Mae Loan Lookup ( Policy covers homeowner eligibility, listing guidance, offer evaluation Freddie Mac Standard Short Sale very similar and applies to loans owned and guaranteed by Freddie Mac; many large servicers have similar programs * If you are not the owner of the property, you must have the consent of the owner to use the Fannie Mae Loan Lookup tool. 5

6 Fannie Mae website provides information for listing agents Fannie Mae has a website with information for listing agents about homeowner eligibility, listing guidance, offer evaluation 6

7 Fannie Mae website provides information for listing agents Listing agent page shows Register an Offer and Escalate an Issue Information is divided into 5 key steps 7

8 Recommended listing price If a homeowner expresses interest in a short sale or property is listed, a value should be ordered To request a recommended list price 1 : Contact the servicer OR Request from Fannie Mae. To request a recommended list price: Go to and select Request recommended list price Provide the Fannie Mae Borrower Authorization Form The servicer will provide the recommended list price check with the servicer List the property in MLS as Active 1. The recommended list price is a recommendation, and does not ensure acceptance of an offer at or above the recommended list price. 8

9 Register an Offer Agent should submit highest and best offer to servicer for review: Provide fully executed purchase contract Submit estimated net sheet or HUD-1 settlement statement Agent may register the highest and best offer with Fannie Mae: Verify that Fannie Mae owns a loan ( Go to and select Register an offer Provide: Fully executed purchase contract Estimated net sheet or HUD-1 settlement statement Borrower Authorization Form Registering the offer allows Fannie Mae to proactively work with the mortgage servicer to facilitate faster communications and decisions (If not already done), contact servicer with your client to see if client qualifies for a short sale 9

10 Register your offer Why register an offer? Registering the offer with Fannie Mae allows us more transparency into the process and will allow Fannie Mae to proactively work with the mortgage servicer to facilitate faster communications and decisions When to do so? At the same time that the agent submits the offer to the servicer How to do so? Go to and select Register an Offer What do you need? The agent will be asked to provide: Fully executed purchase contract Estimated net sheet or HUD-1 settlement statement Borrower Authorization Form 10

11 Short sale offer requirements Arms length transaction between seller and buyer all parties to sale, including closing agent, must execute a Short Sale Affidavit (on Fannie Mae web site) Seller must not remain in property as tenant or later obtain title or ownership of property Neither seller nor buyer will receive funds or commissions from sale of property (except approved relocation assistance for seller) All agreements and sale contracts must be disclosed to servicer All funds that change hands must be disclosed to and approved by servicer and shown on the HUD-1 Deed restriction to prohibit selling property within 30 days (any price) OR selling property for >120% of short sale price within 31 to 90 days 11

12 Investor Offer Review & Decision Offer response times: Servicers must acknowledge a short sale offer within 30 and provide a decision within 60 days Agent may receive a counter offer from servicer Homeowner must be evaluated and determined eligible for a short sale before offer can be reviewed Mortgage insurance Broad delegations from MI companies to approve short sales Seconds Total payments to seconds must not exceed $6,000 If second accepts payment, second must release homeowner from liability for the second Seconds may not require contributions from agent or homeowner Once all required information has been reviewed, you will receive a final written decision on your submitted offer from the mortgage servicer 12

13 Investor Offer Review & Decision: Escalate an issue Why escalate an issue? Offer submitted 30+ days ago to servicer and no response Agent may escalate an issue to Fannie Mae for the following reasons: Contest a value Have an issue with an offer currently under negotiation Have a policy related question on short sales When to do so? After contacting the servicer to attempt to resolve the issue How to do so? Go to and select Escalate an Issue What do you need? Information requested will vary based on the type of escalation. For example, a escalate an offer requests: Name and contact info for servicer point of contact Date of offer submission Gross offer amount Borrower Authorization Form 13

14 Fannie Mae valuations Our valuation processes and requirements support our mission Fannie Mae works to prevent foreclosure, minimize taxpayer losses and stabilize neighborhoods Our list price and market value guidance maintains neighborhood We use BPOs, appraisals and a range of other data from internal and external sources and including current listings, pending sales and sold properties to estimate values 14

15 Fannie Mae valuations What goes into a Fannie Mae valuation? We will request a BPO and appraisal A Fannie Mae valuation analyst typically an experienced licensed appraiser will review the BPO, appraisal, MLS comps and a range of other data to estimate values We seek comparable sales that are recent and close to the subject property We consider and may adjust for condition of the property, repairs required and other factors Our list price and market value guidance maintains neighborhood property values 15

16 Fannie Mae valuations BPO and appraisal: It can take ~3 weeks to order and complete an appraisal and BPO; additional time may be required for review Advise your client that an agent and appraiser will need access to the property 16

17 Fannie Mae valuations MLS Comps: Fannie Mae uses comparable sales that are recent and in close proximity to the subject property Anomalies and sales that are not market transactions will be given little consideration In rapidly changing markets, Fannie Mae is looking for comparable sales that occurred less than 60 days ago. Current pending sales and listings can also be used in the appraisal /BPO report or in the analysis Some market participants have different objectives 17

18 How to Contest a value If you want to contest a Fannie Mae value, escalate to Fannie Mae: Go to and select Contest a value Provide: Borrower Authorization Form List of significant value-related issues MLS Sheets of 3-6 comps with listing history and realtor comments Supporting documents such as appraisal or buyer's BPO, CMA, inspection report or contractor's estimate Please include color photos, comments and descriptions! Expect a response from the servicer Agents may contest a value even if there is no offer accepted 18

19 What should agents do if they suspect fraud? Fannie Mae is concerned about a range of short sale frauds which can increase taxpayer losses and destabilize neighborhoods Examples of short sale fraud: valuation manipulations, non-arms length transactions, pocket listings, abuse of pending status, short sale flipping To report potential fraud on a Fannie Mae property: FANNIE ( ) Mortgage_Fraud_Program@fanniemae.com 19

20 Top 5 Recommendations 1. With your client, understand your client s eligibility for a short sale and contact the servicer before listing and accepting an offer 2. Request a recommended list price. If necessary, escalate valuation concerns 3. List and market the property ensuring maximum exposure to obtain highest and best offers possible 4. Submit the highest and best offer to the servicer and register it with Fannie Mae 5. If necessary, escalate an issue to Fannie Mae directly 20

21 Resources HomePath short sale page ( or Short Sale tab from Fannie Mae Customer Resource Center: 800-7FANNIE ( ) Fannie Mae Standard Short Sale Guidance to Servicers (HAFA II): Guidance: FAQs: To report potential fraud on a Fannie Mae property: FANNIE ( ) Mortgage_Fraud_Program@fanniemae.com Resources for homeowners: Questions? 21

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