Working the four programs

“Short sale” is not one process — it’s four programs wearing one name. Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA) each control valuation differently, hand approval authority to different desks, and pay different incentives. Chapter 4 gave homeowners the eligibility view; this is the operator’s version. Rules verified August 2026 — reverify at file open.

The comparison at a glance

	Fannie Mae / Freddie Mac	FHA (Pre-Foreclosure Sale)	VA (compromise sale)
Program name	Fannie Mae Short Sale / Freddie Mac Standard Short Sale	Pre-Foreclosure Sale (PFS), Handbook 4000.1 as amended by ML 2025-12	Compromise sale, 38 U.S.C. 3732(c)
Who approves	Servicer, under delegated authority for standard cases; non-delegated cases route to the GSE (government-sponsored enterprise) via its servicing systems. MI companies have blanket delegations to servicers for GSE short sales	Servicer approves within HUD’s parameters; exceptions need a variance from HUD’s National Servicing Center	Servicer processes and submits through VALERI; VA (regional loan center technicians) oversees; VA’s own valuation drives the numbers
Valuation instrument	GSE-obtained/approved value; must be dated or refreshed within 90 days of approval	FHA roster appraisal, valid 120 days; hardship validated via the Deficit Income Test (DIT) on the standard path	VA appraisal producing a Notice of Value (NOV) — must still be valid on the closing date
Minimum net rules	GSE net-proceeds expectations against its value; contribution/promissory demands possible where reserves allow (Freddie’s trigger: reserves above the greater of $10k or 6× payment)	Tiered minimum net by marketing window: 88% of appraised value first 30 days, 86% next 30, 84% thereafter	Net-value formula against the NOV; deal must clear VA’s loss math
Borrower incentive	Up to $7,500 relocation assistance (owner-occupant, not employer- or homeowners-association (HOA)-paid moves)	Up to $3,000 consideration (restored by ML 2025-12; briefly $7,500 under ML 2025-06 — confirm current figure in writing)	No standard relocation incentive; servicer incentives handled in VALERI
Decision clock	BRP (Borrower Response Package) acknowledgment in 5 business days; evaluation notice ~30 days; revised-offer responses ~10 business days	Approval to Participate (ATP) sets a defined marketing period (typically 120 days) with the tiered pricing above	No fixed statutory clock — the NOV and servicer submission quality set the pace

Fannie / Freddie: play the delegation

• Delegation is your friend. For standard files the servicer can say yes without asking the GSE — meaning a stalled file is usually a servicer problem, and the GSE escalation channels (Chapter 12, rung 4) are the correction. Know which case type you have; ask the negotiator directly whether the file is delegated.
• Work the 90-day valuation window. If lender review drags past it, the value gets refreshed — sometimes in your favor in a cooling market, sometimes not. Time valuation disputes early, not at day 85.
• Anticipate the contribution conversation. Pre-screen the borrower’s reserves against the trigger math before submission so a cash-contribution or promissory-note demand never surprises your client at the approval letter (waivers apply below $500 or for death-of-borrower hardships on Freddie files).
• Imminent-default files are viable. Current-but-struggling borrowers can qualify under streamlined paths (90+ days delinquent gets documentation relief; ≤620 FICO features in the streamlined test). Don’t let anyone tell your client to default first — Chapter 3’s myth, now your compliance line too.

FHA: run the ATP calendar

• The PFS is the most procedural of the four: application → DIT hardship validation → appraisal → Approval to Participate → marketing under the tiered net thresholds → sale → claim. Your leverage is calendar management: list at a price that clears the current tier, and know the date each tier steps down — an offer at 85% that’s dead on day 55 is approvable on day 61.
• The appraisal’s 120-day validity and the marketing period run concurrently; a slow buyer can strand you with an expired appraisal. Build financing timelines accordingly.
• Anything outside the box — occupancy exceptions, tier relief, timeline extensions — is a variance request to HUD’s National Servicing Center, filed by the servicer. Ask for it explicitly; servicers rarely volunteer.
• State the incentive carefully: $3,000 under current guidance, and put “as confirmed by servicer in writing” in your client conversation — this figure moved twice in 2025.

VA: respect the NOV

• The Notice of Value is the whole game. VA’s appraisal sets it; the compromise sale must clear VA’s net-value math against it, and the NOV must be valid when the sale closes. Price to the NOV, not to your CMA (comparative market analysis), and calendar its expiration like a contract deadline.
• The servicer reports events through VALERI and VA technicians oversee compliance — which gives you a real escalation address (the VA loan technician) when a file sits.
• Have the entitlement conversation early (Chapter 4): a compromise sale can leave part of the veteran’s entitlement tied up until VA’s loss is repaid. Pair every VA short sale with a clear explanation of future VA-loan capacity — it changes some sellers’ decisions.
• No mandatory VA waiting period for the next VA loan, but expect ~2-year lender overlays (Chapter 8) — set expectations accordingly.

The fifth category: portfolio and non-QM loans

No published rulebook — the bank owns the loan and negotiates commercially. Everything is arguable: valuation, netting, incentives, deficiency. Your file discipline (Chapter 12) matters more here, because there’s no program floor protecting your client; and the deficiency-waiver negotiation (Chapter 7) is pure leverage work. Treat every portfolio approval letter as a first draft.

The operator’s rule

Before submission, write one sentence: “This is a [investor] file, approved by [desk], priced against [valuation instrument] expiring [date], with [incentive] for my client.” If you can’t complete that sentence, you don’t know the file yet — and the servicer will teach you at your client’s expense. Program rules move (2025 proved it twice); verify against current guidance at every file open.