The sudden glut of foreclosures on the real estate market left by the recent banking crisis has caused Fannie Mae to introduce several new and updated policies regarding bankruptcy, foreclosures, short sales, and principal residency conversion in a document released recently called Fannie Mae Announcement 08-16.

To get the whole story straight from the horse’s mouth, click on Fannie Mae Announcement 08-16. You will find the full details on these changes. For my “Reader’s Digest” version, the following summary will hopefully help readers quickly understand what might be a huge market influencer in the next six months.

The biggest change made in the Fannie Mae Announcement 08-16 is that Fannie Mae is establishing a policy for short sales (also known as “pre-foreclosure sales”). Fannie Mae defines a pre-foreclosure sale as one that “involves the sale of the property by the borrower to a third party for less than the amount owed to satisfy the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer.”

Probably the most important part of this announcement is the change in time periods for reestablishing credit after an action. Fannie Mae says, “due to the increased incidence of pre-foreclosure sales, Fannie Mae is establishing a 2-year time period for reestablishing credit following completion of the action.” This means that families which have gone through a short sale rather than a foreclosure will have their credit restored in only two years. This makes short sales a much better strategy than foreclosure, which was actually made worse by Announcement 08-16.ve

Under the old guidelines, homeowners who have been foreclosed on required a 4-year time period from the date the foreclosure sale was completed before they could reestablish credit. Unfortunately, the Fannie Mae Announcement 08-16 lengthens this time period to 5-years from the date the foreclosure was completed.

So, as you can see, a family using a certified short-sale real estate expert can put restore their credit much quicker than if they walk away and allow the bank to foreclose. Hopefully, this among many steps taken recently by the Fed and the government will help in the recovery of today’s real estate market.