|
Issue
|
Foreclosure
|
Short Sale
|
|
Future Fannie Mae Loan - Primary Residence |
A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of
5 years. |
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage only after
2 years. |
|
Future Fannie Mae Loan - Non Primary |
An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of
7 years. |
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only
2 years. |
|
Future Loan with any Mortgage Company |
On any future 1003
mortgage application, a prospective borrower will have to answer
"YES"
to question C in Section VIII that asks “Have you had
a property foreclosed upon or given title or deed in lieu thereof in the last
7 years?”.
This answer will affect future
interest rates. |
There are no similar declarations or questions regarding a short sale
on the mortgage
application. |
|
Credit Score |
Score may be lowered anywhere from
250 to over 300
points. Typically will affect score for over
3 years. |
Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as
50 points
if all other payments are being made. A short sale’s affect can be a brief as
12 to 18 months. |
|
Credit History |
Foreclosure will remain as a public record on a person’s credit history for
10 years or more. |
There is no specific reporting item
on a credit report for ‘short sale’. The loan is typically reported ‘paid in full, settled’. |
|
Security Clearances |
Foreclosure is the
most challenging issue against a security clearance
outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be
revoked and position will be terminated. |
A Short Sale on its own
does not challenge most security clearances.
Officers in the military
may be adversely
affected by a short
sale. |
|
Current Employment |
Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate
reassignment or termination. |
A short sale is not reported
as such on a credit report and is therefore
not a challenge to employment. |
|
Future Employment |
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in
most cases will challenge employment. |
A short sale is not reported on a credit report and is therefore
not a challenge to employment. |
|
Deficiency
Judgment |
In 100% of foreclosures
(except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment. |
In some successful short sales it is possible to convince the lender to
give up the right to pursue a deficiency judgment
against the homeowner. |
|
Deficiency
Judgment (amount) |
In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible
deficiency judgment. |
In a properly managed short sale the home is sold at a price that should be closer to
fair market value and in almost all cases will be better than an REO sale resulting in a
lower deficiency. |
