Recovering From a Short Sale
By LISA PREVOST
Borrowers who owe more than their homes are worth can sometimes get out from under by negotiating a short sale with their lender. But short-sellers are branded as higher-risk borrowers, so new loans won’t come quickly or easily.
A short sale is when a lender agrees to accept less than is owed on a property, allowing the borrower to walk away and avoid foreclosure. Fannie Mae, the federally controlled mortgage investor, sets guidelines for the minimum amount of time that must elapse before a short-seller is eligible for another loan salable to the agency.
Fannie Mae requires a waiting period of at least four years for short-sellers who can only put down 10 percent on their next home. The waiting period is shortened to two years for borrowers who can come up with 20 percent.
The forced waiting period is essentially a penalty on borrowers who didn’t fully repay a previous loan. And lenders who sell their loans on the secondary market are unlikely to shorten Fannie’s minimums, said Myron Headen, a senior vice president in the residential mortgage division of Bryn Mawr Trust in Pennsylvania.
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