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Fannie Mae and Freddie Mac will require mortgage servicers to make decisions on short sales under new timelines beginning this June.
Servicers must review and respond to a borrower within 30 days of receiving all documentation. According to guidance released Tuesday, the servicer can take up to 60 days on a decision if negotiations with mortgage insurers or other stakeholders linger.
Short sales have in the past taken several months to complete as servicers, borrowers, buyers, investors and different lien holders had to agree on a transaction. Mortgage servicers working with the goverment-sponsored enterprises completed a record 32,000 short sales in the fourth quarter, up 14% from the previous quarter, according to agency data.
Under the new guidance, which takes effect June 15, the servicer has three business days to acknowledge the documentation was received, and must notify the borrower within five days if more paperwork is needed.
If a short sale is still under review after 30 days, the servicer must provide weekly status updates to the borrower.
The Federal Housing Finance Agency directed the GSEs align their short sale guidelines.
"FHFA and the enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure, keep homes occupied and help maintain stable communities," said FHFA Acting Director Edward DeMarco. "These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives."
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