Starting November 1, 2012, if you loan is serviced by Fannie Mac or Freddie Mac, you will not have to receive approval from the mortgager insurer to proceed with a short sale.  Typically, if a homeowner purchases a home and their down payment is less than 20% of the fair market value of the property, the homeowner is required to purchase private mortgage insurance.  The private mortgage insurance provides a safety net to the lender in the case of default.  If a homeowner defaults on a mortgage, the lender could seek  insurance proceeds to cover a portion of this loss from the private mortgage insurance.  As a result of this ability to collect insurance proceeds from the private mortgage insurer in the event of a default, mortgage insurers had the authority to deny a short sale.  However, starting November 1, 2012, under new short sale guidelines for all loans serviced by Fannie Mac and Freddie Mac, mortgage insurers will allow a short sale or deed in lieu without their approval.  What this means is one less step in the short sale process, which hopefully will lead to faster closings.

-Randy M. Creighton