Previously, loan purchaser Fannie Mae required four years to elapse after a short sale in order to qualify for a Fannie Mae loan.  Last week, they announced that they are reducing the amount of time which must pass after a short sale:

That time period has been reduced to two years, with a 20% down payment
Or four years with a 10% down payment.

I don’t disagree with giving these former homeowners the opportunity to obtain financing, but I believe that more prudent risk management should be employed.  Perhaps the down payment requirement should be just a bit higher, maybe 25% or 30%.  Home prices in most Los Angeles neighborhoods have dropped 30% or more.  We need to remember that lenders aren’t doing homebuyers a favor by making them loans they are unable to pay back. 

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Mortgage Fraud and short sales