"One of our escrow officers received a correspondence yesterday on a FNMA (aka, Fannie Mae) short sale escrow that indicated that FNMA has implemented a new policy effective today, 12-15-2009 that they will no longer postpone trustee sale dates. FNMA is requesting that the short sales are closed before the sale date. If they can not close the short sale before the Trustee Sale date, the property will go to Trustee sale and be foreclosed."
What exactly is a Trustee Sale, you ask? A Trustee Sale is basically a Foreclosure Sale conducted under the stipulations of a Deed of Trust. The Deed of Trust is a notarized document a borrower signs that secures the borrower's loan to the property, and permits the sale of the property upon default by the borrower. Upon default, the Trustee (could be the lender, or the lender's authorized agent) is authorized to foreclose the mortgage and put the property up for a Trustee's Sale. The proceeds of the sale are distributed by the Trustee according to the priorities listed in the deed of trust...usually first distributed to the 1st lender, and then any remaining proceeds (if any) are distributed to the 2nd lender, or any junior liens. After the sale is complete, the trustee transfers ownership to the winning bidder. The original owner/borrower does not have the right to redeem the property after the sale.
UGH. I immediately thought about my two approved short sales that are scheduled to close in January...I went through my files and whew - neither one has a Trustee Sale date scheduled. I do however, have other short sales in progress where there is an existing Trustee Sale date scheduled, or there could be a Trustee Sale scheduled at any time. On several past occasions, I have been able to convince lenders to postpone or reschedule existing Trustee Sale dates so that the short sale can be analyzed and approved. If this is true, then on Fannie Mae loans, there may no longer be an option to get these sale dates postponed.
Of all my short sales in progress right now, I think about 20% are Fannie Mae loans and may be affected by this new policy...not sure if that precentage is representative of all existing loans out there.
Sellers - DO NOT wait to the last minute to get your short sale started. You may not know if you have a Fannie Mae loan, and your lender/loan servicer probably would not be able to tell you if you were to call and ask. You can use this online tool to find out if you have a Fannie Mae loan.
Buyers - be sure to have your agent ASK the listing agent to find out if he/she knows if the loans being negotiated for the short sale are Fannie Mae, AND if there is a Trustee Sale date scheduled, or if there is the possibility of a Trustee Sale being scheduled in the future (will depend on if/when a Notice of Default has been filed).