Lender Required Delinquency

Lenders Require Mortgage Delinquency for Short Sale

It is commonly known that lenders require that negative equity homeowners be delinquent first before short sale approval can be given, with very few exceptions. Because of the lengthy short sale process, this delinquency often goes past 120 days. After 120 days, mortgage lates typically receive a foreclosure code from the Metro 2 credit system. This is not known by most short sellers until they reapply for a new conventional mortgage years later when it shows up in both the Fannie Mae and Freddie Mac automated underwriting systems. The foreclosure code results in a new mortgage denial if the past short seller applies for a conventional mortgage.

This occurs on both first and second mortgages.

On August 16, 2014, Fannie Mae instituted a “fix”, or workaround that allows a correction when the erroneous foreclosure code shows up on a past short sale. Please go to Fannie Mae “fix” 8/16/14 and follow directions for  If you are strictly trying to correct a FORECLOSURE code noted on findings for a short sale.