Wednesday, July 3, 2013

Short Sale vs. Foreclosure - Fannie/Freddie Waiting Periods

I have recently had several situation develop with Mortgage Servicers inaccurately reporting Short Sales as Foreclosures on credit reports. Per Fannie/Freddie guidelines the waiting period for a Short Sale is 2 years with a Foreclosure being 7 years.
I have had several clients that are 2 years after a short sale with the lenders reporting as a foreclosure. The issue is that the automated underwriting engine will not approve the loan because it sees a foreclosure. A lender can "Manually Underwrite' the file with documentation to support a short sale. The problem is that no lenders will manually underwrite and approve the loan leaving the borrower with having to get the lender to change the credit report. This could be a very tedious task to say the least. As of now, there is no code for a lender to distinguish between a Short Sale or a Foreclosure. Hopeful this will change in the future.

If you are having an issue with this give me a call.

Keith Stewart