Under revised guidelines announced by the Federal National Mortgage Association, borrowers who have had a pre-foreclosure sale, short sale or deed-in-lieu of foreclosure might not have to wait as long to get a conforming mortgage.
Fannie Mae reduced the waiting period for borrowers who have had a pre-foreclosure event, according to Announcement SEL-2010-05 issued today.
The move is being made to “support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their debt.”
Under the updated policy, borrowers with a deed-in-lieu of foreclosure, a pre-foreclosure sale or a short sale during the past two years can qualify for an 80 percent loan-to-value mortgage. If the pre-foreclosure event occurred more than four years ago, then the LTV increases to 90 percent. After seven years, borrowers qualify according to Fannie’s eligibility matrix.
Previously, borrowers with a deed-in-lieu had to wait four years, while pre-foreclosure sales were limited until two years. No policy existed for short sales.
With extenuating circumstances, borrowers with a pre-foreclosure event will only need to wait two years to qualify for a 90 percent LTV.
Fannie said the revised deed-in-lieu policy will be reflected on Desktop Underwriter in June. Beginning in July on borrowers with previous short sales and pre-foreclosures, “Lenders will be required to determine during their review of the credit report if there is a pre-foreclosure or short sale and must manually apply the new policies to all loan case files underwritten through DU.”
The secondary lender clarified that when co-borrowers had separate, individual bankruptcies, only one event will be counted.
