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What is a Short Sale?

A standard short sale (“short sale”) is the sale of the mortgaged premises for less than the total amount necessary to satisfy the mortgage, according to Single-Family Seller/Servicer Guide (Guide) Section 9208.1.

If the sale proceeds are less than the total amount due, but there is a mortgage insurance (MI) claim payment or a borrower cash contribution that results in Freddie Mac’s receiving all sums owed on the mortgage, then Freddie Mac considers the transaction a “make-whole” pre-foreclosure sale rather than a short sale and Freddie Mac’s prior approval is not required (see Guide Section 9208.8).

The Servicer doesn’t need to obtain Freddie Mac’s prior approval for a make-whole pre-foreclosure sale, as detailed in Section 9208.8): A Freddie Mac standard short sale, including the streamlined short sale, meets the requirements of Sections 9208.1 through 9208.8.

All other short sales must be submitted to Freddie Mac for review and approval.

Servicer Incentives

Freddie Mac offers incentives for Servicers to complete short sales, which are described in Section 9204.6.

Exclusionary List

Servicers must have in-house quality control (QC) policies and review the practices of their business partners. Any party that engages in fraudulent activity in a short sale may be added to the Freddie Mac Exclusionary List, barring future involvement in Freddie Mac business, and reported to applicable regulatory authorities.

See Chapter 3201 for more information on Freddie Mac requirements for fraud prevention, detection and reporting.

For more detailed information about short sales, refer to Chapter 9208.