New Requirements for Fannie Mae Short Sales

By Eric A. Mine, Associate Legal Counsel II

With the recent upgrades to its web portal,, Fannie Mae now allows real estate professionals to submit problems in short sale transactions directly to a representative. Other features rolling out soon will allow brokers to negotiate and receive first lien approval directly from Fannie Mae. While this may appear to be a welcome change to the process, licensees should bear in mind that in North Carolina negotiating the settlement of a debt and counseling a seller or buyer on the legal or tax implications that may result from a short sale are both considered the practice of law. Potential clients considering selling property through the short sale process should be directed to consult with a licensed attorney.

Upgrades to the Fannie Mae web portal aren’t the only changes that will affect brokers in North Carolina. With the release of Servicing Guide Announcement SVC-2014-09, the mortgage giant announced changes to some short sale servicing requirements which took effect on August 1, 2014.

For all new short sales in which Fannie Mae is the lender, borrowers will be prohibited from listing their own property. Practically, this change means that all short sale properties now must be listed with a licensed real estate professional who is not the borrower before Fannie Mae will approve an offer.

Fannie Mae has also announced a change to its Short Sale Affidavit (Fannie Mae Form 191). Since 2012 Fannie Mae has required that all parties involved in a short sale, including real estate brokers, sign that affidavit at the time of closing to confirm that the transaction was conducted at arm’s-length. The affidavit has now been updated to include an attestation from the listing broker affirming that all purchase offers have been presented to the seller/borrower and that no offers have been held or concealed. While the attestation is new, the requirement to deliver all offers to a seller is not.

Commission Rule 58A.0106(a) requires that all agency agreements, contracts, offers, leases, or options affecting real property be delivered immediately, but in no event more than five (5) days after execution. Licensees should also keep in mind that in a short sale transaction, once an offer has been submitted to the lender, all subsequent offers must also be submitted to the lender, even after an offer has been accepted by the seller. Fannie Mae, as lienholder, is an interested third party and must approve the short sale; therefore Fannie Mae is owed a duty of honesty and fair dealing in the transaction.

The changes implemented by Fannie Mae are designed to stream-line the short sale process. But they do not make the pit-falls and problems inherent in short sale transactions any less significant. Licensees should be well aware and well versed in the risks posed to their clients, whether buyer or seller, before engaging in a short sale transaction.

This article came from the October 2014-Vol45-2 edition of the bulletin.