Feds change 'short sale' rules

In this May 13, 2020 photo, a brand-new $1.1 million, 5,200 square foot home in Davie, Fla. is offered for short sale. The number of homeowners who missed at least one payment on their mortgage surged to a record in the first quarter of the year, a sign that the foreclosure crisis is far from over.(AP Photo/J Pat Carter)

April 19, 2012 2:22:01 PM PDT
The Federal Housing Finance Agency has taken a step that could keep many homes from foreclosure.

The agency, which oversees Fannie Mae and Freddie Mac, laid out rules that will require lenders to review and respond to short sale requests within 30 days, and make a final decision within 60 days.

In a short sale, the bank that holds the mortgage must agree to accept a price for a home that's less than what the homeowner still owes.

This could save banks tens of thousands of dollars in lost property value and costs by avoiding foreclosure. However, banks often take so long to review and approve short sales that the deal falls apart.

Home sellers will benefit because they'll take a one-time hit to their credit score for a short sale, compared to multiple delinquencies associated with a foreclosure.

Buyers will also get homes in better condition because the sellers have been living there and maintaining the homes.

The new rules go into effect June 1.

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