As many of you have likely heard, there is widespread concerns in the lending community that title may not be clear on closings during the redemption period. This is causing some lenders to not approve buyer’s mortgage for properties closing in the redemption period for short sale homes. The concerns of FNMA, Freddie Mac, and HUD are that seller may still have redemption rights through the end of the redemption period regardless of the sale. According to a law firm in Maple Grove, this does not apply in MN due to the fact that seller must obtain certificate of redemption (done by seller’s title company) in order to close during the redemption period. Therefore, in MN, because seller has already “redeemed” as a result of the closed sale, they no longer have redemption rights and the title is clear.
Many mortgage brokerages have their attorneys communicating with FNMA, Freddie, and HUD right now clarifying the redemption issue according to MN law. However, in the meantime, some lenders are refusing to fund buyer’s mortgages in this situation. Wells Fargo Home Mortgage is one that has taken the lead on not funding these mortgages as corporate policy and others are following suit. Many other may follow suit so make sure you address this if there is a concern.
Therefore, if any of your short sales are in the redemption period, Real Estate agents or Realtors MUST now contact the buyer’s loan officer, inform them that this property is in the redemption period and ask them to verify that the buyer’s approval letter is still sound and that their company can fund the buyer’s mortgage when short sale approval is received. If the loan officer cannot confirm that, require that they consult their superiors or the mortgage underwriter for confirmation.
If their answer is that they cannot, the buyer will need to either quickly find a mortgage company who will fund the new mortgage or sign a cancellation of the purchase agreement.
The law firm in Maple Grove is in the process of gathering contact information for lenders that still have investors that will take these loans. We will have a list available for you soon. If your own favorite loan officer can still fund these loans, forward their contact information to me and I will add them to the list. If one of your current buyers can no longer obtain the mortgage from their current lender, you can then provide them with referrals to lenders who can perform.
For short sale redemption period listings if you are selling your home without current offers, make sure potential buyer’s loan officer is aware that the property is in redemption period and that their approval letter is valid in that circumstance. For the time being and until this is straightened out with FNMA, Freddie, and HUD, your disclosure of redemption period issues is critical to obtaining the right buyer and not costing your seller unnecessary foreclosure by working with buyer that cannot get financing from their preferred lender. The law firm will be discussing this issue with sellers as well and informing them of their rights to postpone the sheriff sale themselves according to MN statute if seller’s lender will not postpone the sheriff sale for them.