PMI Group latest mortgage insurer to give Fannie Mae short-sale authority
Fannie Mae mortgage servicers can complete short sales and deeds in lieu of foreclosure without getting separate approval from the now bankrupt mortgage insurer The PMI Group, a change that's expected to further reduce barriers to short sales.
A mortgage insurance company must give clearance before a short sale can be completed on property underlying a guaranteed loan.
Five mortgage insurers now give Fannie Mae blanket authority to clear any short sales on their behalf: Genworth (GNW), MGIC (MTG), Republic Mortgage Insurance Co. (ORI), Radian Guaranty (RDN) and now PMI, which was seized by its regulator in August and filed for bankruptcy in November.
Fannie said in an alert to mortgage servicers that servicers must still ensure a short sale does not impair any existing mortgage insurance coverage.
A Fannie spokesman said obtaining these agreements from the insurance companies is part of a broader effort to speed up the process and boost short sale completions. The mortgage giant has also distributed its short-sale processing software to multiple listing services around the country.
Fannie Mae and Freddie Mac completed 28,000 short sales and 3,000 deeds in lieu of foreclosure during the previous three months, down from 32,000 total the previous quarter, according to Federal Housing Finance Agency data.
Short sales, an alternative to foreclosure, have struggled to take a larger share of the market away from REO sales, which take place after the property is repossessed. However, the alternative has increased dramatically during the crisis. In the fourth quarter of 2008, the GSEs completed roughly 6,000 short sales and deeds in lieu.