Until recently, a short sale of a mortgage held or guaranteed by Freddie Mac and Fannie Mae could only be made if the mortgage was in default. Existing guidelines issued by these government sponsored entities (GSEs) were similar, but never identical. On July 3, 2012, the Federal Housing Finance Agency (FHFA) issued a directive to Freddie Mac and Fannie Mae requiring them to streamline and standardize their short sale guidelines to their mortgage servicers. The new guidelines will become effective on November 1, 2012. The FHFA believes that this guideline change will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale.

The most significant change allows borrowers with a Freddie Mac and Fannie Mae mortgage who are not in default to be eligible for a short sale. These borrowers will have to demonstrate that they are subject to one of the following hardships:

1)      a borrower's or co-borrower's death,

2)      divorce or legal separation of a borrower or co-borrower,

3)      long term or permanent disability or illness of a borrower, co- 

         borrower or a dependent family member,

4)      home relocation of more than 50 miles due to a job transfer or

         new employment opportunity.