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GSES IMPLEMENT NEW SHORT SALE GUIDELINES LPS: JUDICIAL STATES SEE HIGH SHARE OF AGING PAST-DUE LOANS (LPS) revealed that, in judicial states, the share of aging past-due loans is significantly higher than in non-judicial states. In judicial states, nearly 60 percent of A report from Lender Processing Services borrowers with loans in foreclosure have not made a payment in two years whereas, in non-judicial states, that percentage is at about 30 percent. Among those with loans 90 days or more past due, 50 percent of borrowers in judicial states have not made a payment in more than one year compared to slightly more than 40 percent in non-judicial states. The LPS report also found a surge in HARP refinance activity for those with higher loan-to- value ratios (LTVs) from January to June this year. "Since the beginning of this year, high loan- guidelines to mortgage servicers aimed at making the approval process easier and faster. The two GSEs are consolidating their existing Fannie Mae and Freddie Mac are issuing new short sale programs, streamlining the rules for qualifying borrowers, and reducing documentation requirements. The changes are part of a broader effort by the Federal Housing Finance Agency (FHFA) to simplify and align Fannie and Freddie' deficiency judgments. Borrowers with sufficient income or assets can make cash contributions or sign promissory notes instead. Provisions have also been made for military foreclosure alternative programs—the Servicing Alignment Initiative. The companies' new short sale guidelines, which s go into effect November 1, will permit a homeowner with a Fannie Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on their mortgage if they have an eligible hardship. Servicers will be able to expedite processing a short sale for borrowers with hardships such as death of a borrower or co-borrower, divorce, disability, or relocation for a job without any additional approval from Fannie Mae or Freddie Mac. Effective November 1, all servicers will have the authority to approve and complete short sales that adhere to the new requirements without first going to the GSEs for approval. Borrowers who are 90 days or more delinquent The GSEs will also waive their right to pursue personnel with Permanent Change of Station (PCS) orders. Servicemembers who are to-value refinances have increased significantly. As an example, 2006 vintage GSE loans with 6 percent interest rates and LTV ratios between 100 and 125 percent increased from a 10 percent annualized prepayment rate at the end of 2011 to more than 40 percent in June 2012," said Herb Blecher, SVP at LPS Applied Analytics. Blecher added that LPS data also shows required to relocate will automatically be eligible for short sales even if they are not behind on payments, and they will not be obligated to contribute funds to pay for the remaining deficiency. Tracy Mooney, SVP of single-family servicing this rise extends beyond that subsection and holds true for other vintages with similar characteristics. Other data from LPS showed that the and REO at Freddie Mac, said, "These changes will make it clear that Freddie Mac servicers have the authority to approve short sales for more borrowers facing the most frequently seen hardships. These changes will further empower the industry to minimize foreclosures." One major barrier to short sales that is addressed in the GSEs new guidelines is second lien holders. To prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000 for their consent. In April, Fannie and Freddie also announced with a credit score below 620 will no longer be required to provide documentation for their hardship. The new guidelines will also enable servicers to approve a short sale for borrowers who are not in default but face certain hardships such as the death of a borrower or co-borrower, divorce or legal separation, illness or disability, or an employment transfer of over 50 miles. 14 important tool in preventing foreclosures and stabilizing communities," said Leslie Peeler, SVP of Fannie Mae' national delinquency rate for June was 7.14 percent, down 30 percent from the January 2010 peak when the rate was 10.57 percent. Month- over-month, the delinquency rate in June rose 3.4 percent but was down 7.3 percent. The rate of properties in foreclosure inventory maintained historically high levels at 4.09 percent for June; in December 2005, the rate was 0.44 percent. Foreclosure starts totaled 173,556 in June, which was down 20.7 percent from May and 20.5 percent year-over-year. Despite the decrease, foreclosure starts still outnumber foreclosure sales at a 2:1 ratio, according to LPS. Foreclosure sales numbered 74,000 in June. they were setting requirements to have a decision on a short sale offer made within 30-60 days. "Short sales have become an increasingly "We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders, and mortgage insurers step up to the plate with us." s National Servicing Organization. STAT INSIGHT Mortgage-related businesses closed in the first half of 2012, including 31 banks, 13 nonbanks, and 8 credit unions. Source: Mortgage Graveyard Report from Mortgage Daily

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