Fannie Mae will Make Things More Difficult for Short Sales in August in Massachusetts and New Hampshire

Fannie Mae will Make Things More Difficult for Short Sales in August in Massachusetts and New Hampshire

 

As if short sales weren’t difficult enough with lender red tape, lost paperwork, lenders forcing homeowners onto auction sites when they already have marketing and gotten an offer, and dictating unfavorable terms to already financially struggling homeowners, Fannie Mae has decided they will not pay ANY money towards secondary liens that aren’t actual mortgage liens.

fanniemaeYes, you heard right.  If there is a municipal lien on a property for let’s say an overdue water bill that has also accumulated penalties and interest, Fannie Mae won’t pay.  Although it doesn’t say, I’m assuming this goes for all Federal and State tax liens on title.  Unfortunately in my business I’ve seen HEFTY federal tax liens and we’ve always been successful in negotiating those liens down and rolling in a payout from the proceeds of the sale, but nope, Fannie Mae has drawn a line in the sand.

This is how the new announcement reads:
https://www.fanniemae.com/content/announcement/svc1409.pdf

Servicing Guide Announcement SVC-2012-19, Standard Short Sale/HAFA II and Deed-in-Lieu of Foreclosure Requirements

Fannie Mae is revising its policy on subordinate lien payments for short sales or Mortgage Releases to prohibit use of the $6,000 from the sale proceeds to settle non-mortgage liens. The $6,000 in available subordinate lien release funds must be used only for subordinate mortgages or deeds of trust recorded in the land records that constitute a valid lien against the property. The $6,000 in available funds must not be used for other types of liens, including but not limited to:

§ homeowners’ association (HOA) liens,

§ judgments,

§ mechanic’s liens, and

§ materialmen’s liens.

 

If such other liens impede the closing of a short sale or Mortgage Release, the servicer must submit the case to Fannie Mae for prior written approval. As a reminder, the servicer is required to protect the priority of Fannie Mae’s mortgage lien and must clear priority liens for delinquent HOA dues and condo assessments on properties acquired through foreclosure or deed-in-lieu of foreclosure as outlined in Announcement SVC-2012-05, Payment of Homeowners’ Association Dues and Condo Assessments and related sections of the Servicing Guide.

This pretty much stops any sale with any type of secondary non-mortgage lien in Massachusetts as it’s a super lien state.  There are certain liens that can TRUMP the mortgage including Condo Dues.  I’m not sure WHY no one has pushed back on this, but no condo association is going to give up their position with no payment…and homeowners who don’t have a dime to their name cannot afford to pay these liens, so that leaves it on the buyer.  This will minimize the buyer pool, excluding any FHA, VA, USDA borrower because the buyer will have to have CASH to pay off secondary liens and what do you think a buyer is going to do in that circumstance?  They will DEDUCT that amount from the purchase price NETTING Fannie Mae less, so this new announcement doesn’t help them at all.  Cash buyers are always lower buyers.  No buyer is going to pay full price for a property knowing he has to pay another $15,000 in cash for liens!!!!!  No federally financed buyer will have the cash on hand to assist with the liens.

This is a very poor move on Fannie Mae’s part and I don’t think they thought this through at ALL.  The only crumb of possible hope they gave us is if the lien impedes the closing of the short sale the servicer must submit the case to Fannie, which in my experience is a waste.  I have YET to see them approve a secondary non-mortgage lien since last Fall.

 

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