With a new set of rules taking effect on November 1, even home owners who would not have imagined a Phoenix short sale and principal reduction as a possibility for them may want to take another look. The new policies involve any homeowner whose loans were purchased or guaranteed by Freddie Mac or Fannie Mae and is facing a hardship that meets these loan organization’s criteria. Some of the stipulations for “hardship” include: unemployment or a change of employment 50 miles or farther from the owner’s current home, divorce or the death of a wage earner (primary or secondary), long-term disability, or a disaster of some kind.
If short sales are still a new or foreign concept to you, here are the basics. Short sales allow both borrowers and lenders to avoid foreclosure and the unmanageable costs relating to it. By bringing in a new buyer for the house, who is able to purchase the property for below what the current owner owes the lender, the current owner receives a write-down of the piece of the principal that is not being covered by the new purchaser’s buying price. Traditionally, short sales were only available to those who were extremely delinquent on their mortgage payments. Now, if owners qualify for hardship consideration, they may be eligible for a short sale even though they may still be current on their mortgage payments.
That’s not the only addition or change to short sale procedures, and, of course, it’s important to look into the details before moving forward. However, here’s a basic breakdown of other key points:
- Those who are “most in need” may be able to streamline their short sale process (less documentation and quicker results)
- Second lien holders (banks that hold second mortgages) are entitled to a maximum of $6,000 out of the proceeds of the sale
- Armed Forces members are automatically short sale eligible if they’ve received permanent change-of-status orders and are underwater in their current home situation
- Freddie Mac and Fannie Mae will waive their right to pursue deficiencies in states where they’re currently legally able
As a Phoenix short sale expert and trusted local real estate agent, I’d love to help guide you through your Phoenix real estate experience or short sale process. Visit our Phoenix short sale FAQ's page to learn more about the short sale process.