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And banks are often of dragging their feet when a homeowner wants to sell a property short, that is, for less than what is still owed on the mortgage. New federal guidelines could push banks to approve those short sales faster.

Minnesota Public Radio's Annie Baxter has more.

ANNIE BAXTER, BYLINE: A lot of short sales might be better dubbed really long and drawn out sales. Just ask Cathy Yamauchi. She's been trying to unload her house through a short sale since Thanksgiving. A divorce and a drop in income put her in a bind financially, and she says she can't afford the place anymore. She stopped paying the mortgage nine months ago. That's left her in a state of perpetual packing. She points inside a nearly empty kitchen cupboard.

CATHY YAMAUCHI: And then even like my baking dishes, like, I wanted to bake something one night, and I'm like, oh, I already packed that baking dish. So yeah, it's - my cupboards are pretty bare.

BAXTER: Yamauchi initially tried selling the house for the balance on her mortgage, $280,000, but she eventually dropped the price by about 50 grand. That's essentially how a short sale works. The sale price is less than what the seller owes the bank. A buyer made an offer, and since then Yamauchi's realtor has tried twice to submit a short sale request to the servicer. That's the company that collects mortgage payments on behalf of the holder of the loan.

In this case, Citigroup's the servicer. A company spokesman says Yamauchi's short sale application got routed wrong and there were, quote, "lapses in communication among the various parties involved." Citi is now considering Cathy Yamauchi's request, and she just hopes to get an answer soon, so she knows when she's moving.

YAMAUCHI: You're just waiting, waiting. It's a waiting game.

BAXTER: Starting this month, that waiting game will have some new rules - at least in the case of loans controlled by Fannie Mae and Freddie Mac, which account for about a third of the troubled mortgages out there. The companies that service Fannie and Freddie home loans will have to make decisions on short sales within 30 days. A one-month extension is possible, then the servicer has to provide weekly status updates to homeowners on where the short sale stands.

Citigroup didn't want to talk about the new rules on tape, but another major mortgage servicer, Wells Fargo, did oblige, and explained why the short sale process can be so darn complicated.

BART VINCENT: Certainly in some cases there can be some challenges with all the multiple parties that are involved in a short sale and getting approval from everyone that's involved.

BAXTER: That's Bart Vincent of Wells Fargo's short sale division. He says to push a short sale through, servicers have to wrangle consent from a lot of different stakeholders, like the lender or investor who controls the loan, the mortgage insurance company and sometimes a second or third lien holder, any one of which can hold up the process. But Vincent says his bank now has more experience getting those entities on the same page. And he says, on average, Wells Fargo is responding to short sale requests within 15 days of getting all the necessary paperwork.

Vincent knows that Wells Fargo generally favors short sales because they involve smaller losses than foreclosures, which often sell for even less of the original loan amount. Vincent believes his bank will have no trouble complying with the new Fannie and Freddie guidelines.

VINCENT: We think that probably quicker decisions for all of short sales are better for everyone - the investor, the servicer and the borrower.

BAXTER: Real estate agent Chris Willette has handled a couple hundred short sales, and he remains skeptical. He says servicers have ways to botch the paperwork. Willette thinks that will continue, even with the new rules.

CHRIS WILLETTE: Quite frankly they're still going to give the same excuses - that they've lost the paperwork, that the loan number wasn't on every page of the paperwork. I don't think it's going to do much.

BAXTER: Willette also fears that servicers' quicker decisions on short sales could just mean more rejections. Another issue, a lot of delinquent loans that could end up as short sales are not controlled by Fannie or Freddie and won't be helped by the new rules. Still, experts say Fannie and Freddie's new guidelines could nudge servicers across the board to speed up short sales.

For NPR News, I'm Annie Baxter in St. Paul.

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