January 25, 2013 - Short Sales Deed Restriction

TO:           All Our Valued Clients

From:        Sal J. Turano         

Subject:    Short Sales Deed Restriction
 
 

The Federal Housing Finance Agency, an agency created to supervise the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), announced new guidelines relating to short sales which became effective on November 1, 2012.

The guidelines require that where a homeowner having a Fannie Mae or Freddie Mac mortgage, intends to sell his or her home in a short sale, a restriction must be place in the closing deed which provides as follows:

“Grantee herein is prohibited from conveying captioned property for any sales price for a period of 30 days from the date of this deed.  After this 30 day period, Grantee is further prohibited from conveying the property for a sales price greater than [insert 120% of short sale price] until 90 days from the date of this deed.  These restrictions shall run with the land and are not personal to the Grantee.”

We have been advised that payoff letter/instructions from the short sale lender may contain such deed restriction requirements.

Accordingly an exception for the Deed restriction will appear as an exception in our final Policy insuring the purchaser at the short sale and will also appear as an exception in our Mortgage Policy insuring the mortgage made by the short sale purchaser.  If there has not been a deed recorded after the 90 day period has expired no exception for this restriction will be raised in any future title report or policy.

Please note that other lenders may adopt similar deed restriction requirements in connection with their short sales transactions.  However, dates and time periods contained in such restrictions may vary from those mentioned in this bulletin.  Consequently, the short sale payoff/instruction letter and the restriction itself must be read carefully to determine the date and time period restrictions applicable to your transaction.

Should you have any questions regarding this matter, please feel free to contact us.