Mortgages & Creative Financing

Short Sale Negotiating with Fannie and Freddie

79 Articles Written

Lately, I’ve been doing a lot of negotiating with Fannie and Freddie—you know… our friends Fannie Mae and Freddie Mac. These friends have been in the news quite often of late, and they certainly aren’t making short sale processing any easier.

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For homebuyers and home sellers not involved in short sales, there may be very few reasons to even pay attention to whether Fannie or Freddie is the investor note holder. But, for those of us working in the wacky world of short sales, these names become increasingly more important for a few reasons.

For starters, both Fannie Mae and Freddie Mac have created their own loan modification and short sale (HAFA) programs, which may benefit those borrowers who want to participate in loan modifications or short sales. Each of these programs has some very succinct and specific guidelines. So, before taking a short sale listing or working with a prospective short sale seller, you’ll probably want to figure out whether the seller’s note is owned by Fannie or Freddie and learn more about these programs.

Another reason to check out whether a note is owned by Fannie Mae (and this is one that I like) is because Fannie Mae pays a six percent real estate commission on short sales. A few years back, Fannie Mae made this fact public at a time when many of the lending institutions were cutting real estate commission to the bare bones. And, for those of us in real estate who are working twice as hard to make half as much money, this assurance of a six percent commission is pretty good news.

A third reason to check into whether Fannie owns your note has to do with foreclosure. On August 31, of last year, Fannie Mae announced that they would be penalizing servicers who languished too long and did not respect state foreclosure laws. Long gone are the days when you can call the servicer 5 minutes before the foreclosure sale and ask for a postponement. So, with that in mind, borrowers need to be more proactive when it comes to addressing their pre-foreclosure options.

So, how do you know whether Fannie Mae or Freddie Mac owns a specific note? It’s easy. You do a little bit of detective work and look it up right here on the Internet. (Ain’t the Internet great?)

Fannie Mae Loan Lookup

Freddie Mac Loan Lookup

Knowing whether Fannie or Freddie owns the note at the beginning of the transaction will go a long way towards providing quality information to borrowers and prospective short sale sellers.

Photo: flickr creative commons by Ell Brown

    Replied over 8 years ago
    Thanks for this post. I really think you article about the question of taxes and legal liability directly corresponds to this blog as far as the future of Fannie and Freddie. Its easy to forget the complexities of the “new” Fannie and Freddie. Its a constant negotiation with those two. Jason
    don hines
    Replied over 8 years ago
    Well, I am not so proud of my FNMA short sale deal. We were supposed to close in the morning. My title company called my bank about an addendum they put in the purchase agreement that states my loan must not exceed $_ _ _ _ _!!!! About $20,000 less than what I need. It states I cannot convey for the amount of this figure or borrow more than this figure when I finance it for purchase for 3 months. I have just instructed my agent that if this is not struck from the agreement, the deal is dead. Poo Poo on any Government agency. I am PO’d Don
    Jason @ REI Capital
    Replied over 8 years ago
    I also do a lot of work with Fannie Freddie lenders of all types. It’s not fun at all to go through the process. It’s a lot of work. It can really pay off though.
    Replied almost 8 years ago
    I have a question in working with Fannie Mae. My husband and I are currently trying to purchase a short sale where Fannie Mae is the loan holder. We were to close in July 2011 when the night before the second mortgage holder (HSBC) decided they wanted a lot more money. Fannie Mae is negotiating pay off with HSBC…as the buyer of the property is it okay to contact Fannie Mae directly and not through our buyers agent to try and plead our case to get to closing or will that hurt us? Foreclosure auction has been set for November on the property. Thanks
    Melissa Zavala
    Replied almost 8 years ago
    In order to be involved in contacting the seller’s lender, you would need to have authorization from the seller to speak to the bank (since it is the seller’s loan). Usually, the person doing the short sale negotiating knows about a month or two before closing how much each lien holder will accept in order to settle the debt. Additionally, I have never heard of Fannie Mae doing the negotiating. Usually, the real estate agent/negotiator is required to handle all of the communication between the two lenders. It seems like you might want to check in with the short sale processor for the seller and get a little more clarification on the terms and conditions (as well as the time frames). Good luck!
    Replied almost 8 years ago
    We are having issues with a Freddie Mac short sale. They are declining our short sale stating the borrower is not in a hardship. What happened to impending hardships as in state workers on the chopping block to lose their jobs any day now? Does anyone have a contact at Freddie Mac to go to instead of dealing with WFB on this one as the servicer?