Smiling JOe

Fannie Mae tests ‘short sales’ as alternative to foreclosures

ORLANDO, Fla. – Jan. 9, 2009 – Fannie Mae has launched pilot projects in Orlando and Phoenix intended to reduce foreclosures by pre-approving short sales – agreeing on a price and the loss the bank will take prior to a deal even being made. Fannie Mae hopes the program will improve the popularity of short sales with real estate agents, who now tend to shun such deals.

Property professionals initially welcomed short sales, but soon found the process to be a frustrating one. Thanks to squabbling about the sale price and slow approval times by the mortgage companies, many short sales often ended with no sale at all.

“Short sales have received such a bad reputation among real estate agents that, as a portion of the overall mortgage market, they have gone down,” confirms Tom Popik of the research firm Campbell Communications, whose November survey of realty practitioners found that agents had to wait as long as 8.1 weeks to receive a response from the lender on a short sale – nearly double the 4.5 weeks the process took earlier in the year.

Fannie Mae’s pilot program focuses on homes listed at less than the mortgage balance that carry a Fannie Mae-backed loan serviced by Countrywide Financial Corp.

If successful, the pre-short-sale pricing concept could be expanded to other geographical areas and additional lenders.

There are concerns, however, about the program’s success, with real estate agents noting that property prices could decline before the pre-approval is issued.

Source: Wall Street Journal (01/09/09) P. A2; Timiraos, Nick

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

__________________