FHFA short sale alignment also releases current, underwater borrowers

Basically, the recent announcement by the Federal Housing Finance Agency to align short sales between Fannie Mae and Freddie Mac shows the government’s commitment to unilaterally creating a single construct for government-assisted mortgage finance.

The interesting thing is that the FHFA is long-criticized for resisting calls for principal forgiveness.

Read this from the FHFA announcement:

“The new guidelines, which go into effect Nov. 1, 2012, 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.”

So anyone on hard times may be eligible, as long as property values collapsed in their respective markets.

And with a short sale, the property sells for less than the outstanding mortgage debt.

The government will no doubt erase the difference, effectively providing a form of principal forgiveness.

The only catch? The borrower will need to vacate the property.

jgaffney@housingwire.com