Fannie and Freddie Simplifies Foreclosure Prevention Program

The Federal Housing Finance Agency announced Tuesday new rules which will speed up short sales and other foreclosure prevention programs for Fannie Mae and Freddie Mac.

The new rules a part of an effort to streamline the process and requires Fannie and Freddie consolidate their short sale program into one. The rules would allow the two agencies to quickly qualify eligible homeowners for a short sale, where a mortgage lender agrees to take less than is owed for a home.

“These new guidelines demonstrate the FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining the process to avoid foreclosure and stabilize communities,” FHFA acting director said in a statement, “The new standard short sale program will also provide help to underwater borrowers who need to relocate 50 miles of more for a job.”

Under the new guidelines, homeowners with Fannie or Freddie mortgages will be able to sell their homes in a short sale even if they are current on their mortgage provided that they can prove eligible hardship.

The rules also allow mortgage servicers to approve short sales for hardships such as death, divorce or disability without additional approval from the two mortgage giants.

Fannie and Freddie will offer up to $6,000 to mortgage servicers for speeding up the short sale process.

Speeding up short sales will help the housing market, but Fannie and Freddie have been encouraged to also allow for principle reductions to further aid recovery. But the CEO for the government-run mortgage companies has refused the notion.

Mortgage companies have the tendency to favor short sale over mortgage modifications, which is also an effective foreclosure prevention measure. Foreclosure attorneys make it easier for the troubled homeowner to decide which route they want to take in order to save their homes.