Not to worry, your mortgage is $200,000 and your house is worth only $150,000. Fannie Mae to the rescue. Fannie Mae will let you sell your home at $150,000 and Fannie Mae will take the loss. You don't even need a buyer for your home!
This situation is called being "upside down," which means that you owe more than the house is worth. Selling your home when you are "upside down" is called a "short sale."
This is not a new practice. It has been used before but never without a buyer. Most deals fell through because the paper work took too long or because lenders, servicing firms and mortgage guarantors rejected the sales price. For these reasons, "short sales" have a bad reputation among real estate agents.
Now enter Fannie Mae. Listen to this. You don't even need a buyer. Fannie Mae simply wants to agree on a selling price.
Fannie Mae started two test projects at the end of December, one in Phoenix and the other in Orlando. The test projects are limited to properties secured by Fannie Mae and serviced by Countrywide, a subsidiary of Bank of America.
An analysis found that "short sales" losses are about 19% as compared to an average loss of 40% for homes sold on foreclosure.
Some real estate agents feel that the program came too late. Properties are dropping at the rate of 3% per month and the price may have fallen below the pre-approved price by the time the sale is completed.
Is Fannie Mae doing the right thing?
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Reader Comments (Page 1 of 1)
1-13-2009 @ 8:07AM
dk said...
To say that "you don't even need a buyer" is misleading. Fannie Mae is simply pre-approving the amount that they will accept as a payoff. The homeowner still must to find a buyer willing to pay the the price that will hit Fannie's number.