Fannie Mae Changes Rules for Borrowers with a Prior Short Sale or Deed-in-Lieu of Foreclosure
May 20, 2010
On April 14, 2010, Fannie Mae released Announcement SEL-2010-05 revising its rules regarding the eligibility of a borrower to obtain a new mortgage after a preforeclosure event (a short sale (also known as a preforeclosure sale) or a deed-in-lieu of foreclosure). Fannie Mae has changed the waiting period for these borrowers, and added variations depending on the loan-to-value ratio (LTV) and whether there are extenuating circumstances. For a consumer with a prior short sale or a deed-in-lieu of foreclosure without an extenuating circumstance, the new waiting periods are 2 years with a 80% maximum LTV, 4 years with a 90% maximum LTV, and 7 years otherwise. If there are extenuating circumstances, the new waiting period is 2 years with a 90% maximum LTV ratio. Fannie is also tightening the requirements for re-establishing credit. In addition to the waiting periods, the loan must meet delegated underwriting and minimum credit score requirements, and the borrower must have traditional credit. Nontraditional credit or "thin files" are not acceptable.
Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120
