As a short selling agent, when you take a short sale listing, once you have your authorization letter in place, be sure to ask the bank or servicer who the investor is backing the loan you are trying to short sale. If they tell you Freddie Mac Short Sale, you can review the Freddie Mac Short Sale Requirements. A servicer can submit a recommendation to Freddie Mac, but these are the guidelines they have to follow.
Eligibility and Servicer Delegation
Eligible Property Types
Primary residences, investment properties, or second homes.
Borrowers who are current or less than 31 days delinquent must occupy the mortgaged premises as their primary residence.
Every borrower is eligible to be considered for a short sale, provided:
The borrower has one of the eligible hardships in Guide Section 65.17(a).
The sale is an arm’s length transaction as defined in Guide Section B65.40.
The borrower did not enter into a program or arrangement where a third party takes the title to the mortgaged premises and arranges a short sale in exchange for a fee.
Borrowers who are current or less than 31 days delinquent must:
Occupy the mortgaged premises as a primary residence.
Have a monthly debt-to-income ratio greater than 55 percent (service members with Permanent Change of Station orders are exempt from this requirement).
Servicers have delegated authority to approve a Standard Short Sale for:
Borrowers who are 31 days or more delinquent.
Borrowers who are current or less than 31 days delinquent, provided the borrower is experiencing one of the following eligible hardships:
Divorce or separation
Death of a borrower or primary wage earner
Borrower or dependent family member has a long-term or permanent disability
Distant employment transfer or relocation, including Permanent Change of Station orders for service members
If the borrower is current or less than 31 days delinquent and their hardship is other than one of the four listed above, Servicers may submit a short sale recommendation to Freddie Mac for approval.
Borrowers must meet all eligibility requirements for Servicers to approve a short sale.
Mortgage Insurance (MI) Delegation
Servicers can approve Standard Short Sales that are completed in accordance with the Guide without obtaining pre-approval from the participating MI companies.
Servicers can access the list of participating MI companies in the Service Loans application by selecting “Delegated MI Companies” link in the Home tab.
The list will be updated from time to time if MI companies are added or removed from the list.
Using a Borrower Solicitation Package, Servicers must solicit borrowers who are 31 days or more delinquent between the 31st and 35th day of delinquency and again between the 61st and 65th day of delinquency if quality right party contact was not achieved or the borrower did not respond to the initial solicitation.
If the borrower is 90 days or more delinquent and has a credit score less than 620 as of the evaluation date, the Servicer is not required to obtain or review the Borrower Response Package. (The credit score cannot be more than 90 days old as of the date the Servicer evaluates the borrower for a short sale.)
Short Sale Transactions
Servicers must request an estimated market value and minimum net proceeds via the Obtain Valuation tab in the Freddie Mac Service Loans application. The property valuation results provided by Freddie Mac to Servicers will include an estimated market value and minimum net proceeds with a “good through date.”
For borrowers who are 31 days or more delinquent, Servicers may no longer request a property value from BPOdirect® for a Standard Short Sale. Until further notice, for borrowers who are current or less than 31 days delinquent, Servicers must:
Continue to request a property value from BPOdirect for a Standard Short Sale.
Request the minimum net proceeds from Freddie Mac by sending an email to ShortSales@FreddieMac.com that includes the Freddie Mac loan number, Servicer name, Servicer loan number, and contact information.
To gain access to the new Obtain Valuation functionality, you must enroll for a new authorized user role, Workout – Specialist, in the Service Loans application by completing and submitting a new Authorized User Roles Form. The forms are:
Form 902, Freddie Mac Service Loans Application Authorized User Roles Form – For Use by Servicers Only or
Form 902SA, Freddie Mac Service Loans Application Authorized User Roles Form – For Use by Servicing Agents Only.
The Authorized User Role Forms have been updated to include the new user role.
Short Sale Offers
Acknowledge receipt of the purchase offer within three business days.
Notify the borrower within five business days of receiving the purchase offer if there is outstanding information needed to evaluate the offer.
Respond with a purchase offer decision within 30 days of the purchase offer receipt, but no later than 60 days.
If Servicers cannot provide the borrower with a decision within 30 days, they must give the borrower a weekly status update verbally or in writing on why a decision is still pending.
Short Sale Counteroffers
Servicers may only submit a counteroffer if the purchase offer is less than the minimum net proceeds.
The borrower must respond to the Servicer’s counteroffer within five business days.
The Servicer must respond to the borrower within ten business days of receiving the borrower’s response to the counteroffer.
Refer to Guide Section B65.39 for complete requirements.
Short Sale Affidavit Document
Servicers must obtain a short sale affidavit when requiring parties to the transaction to attest that the sale constitutes an “arm’s length” transaction.
Servicers may use the Short Sale Affidavit or a customized equivalent that contains the same level of specificity as the template.
Servicers must continue using Workout Prospector® to submit short sale transactions to Freddie Mac.
Workout Prospector will be updated to reflect the delegated authority and new Standard Short Sale requirements in the future.
$2,200 will be paid upon successful completion of the borrower’s short sale.
Borrowers may be paid up to $3,000 to help with relocation expenses after a completed short sale has been received.
If a Servicer is aware that the borrower has received relocation assistance funds from a third party, Freddie Mac will pay the difference up to $3,000.
Servicers may in their discretion offer the borrower additional financial incentives from their funds to complete the short sale, but Servicers cannot deduct this payment from the short sale proceeds.
Subordinate Lien Holder Incentives
Payment of up to an aggregate of $6,000 to subordinate lien holders will be offered in exchange for releasing each subordinate lien, extinguishing the underlying debts, and waiving the right to pursue the deficiency.
Real Estate Broker Commissions
Unless a real estate broker’s sales commission exceeds six percent of the homeowner’s mortgage, Servicers cannot renegotiate a lower sales commission.