Foreclosure vs. Short Sale

Foreclosure vs. Short Sale

Before You Give Up Your Home, Know the Facts because...You have Options!


Foreclosure vs. Short Sale
Homeowner Consequences

   Issue                     Foreclosure            Successful Short Sale
Future Fannie Mae Loan-
Primary Residence
(effective May 21, 2008
A Homeowner who loses a home to Foreclosure is
ineligble 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 after only 2 years.
Future Fannie Mae Loan-
Non Primary
(effective May 21, 2008
An investor who allows a property to go to
Foreclosure is ineligible for a Fannie Mae backed
invesment mortgage for a period of 7 years.
An investor who successfully negotiates and closes a
short sale will be eliginle for a Fannie Mae backed
investment mortgage after only 2 years.
Future Loan with any
Mortgage Company
On any future 1003 application, prospective
borrower will have to answer YES to question C in
Section VIII of the standard 1003 that asks "Have
you had property foreclosed upon or given title or
deed in lieu thereof in the last 7 years?" this will
affect future rates.
There is no similar declaration or question regarding
a short sale.
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 as brief as 12 to 18 months.
Credit History Foreclosure will remain as a public record on a
person's creddit history for 10 years or more.
Short sale is not reported on a credit history.
There is no specific reporting item 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 misdeameanor 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.
 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 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 Judgement In 100% of foreclosures (except in those states
where there is no deficiency) the bank has the right to pursue a deficiency judgement.
In some successful short sales it is possible to
convince the lender to give up the right to pursuit a deficiency judgement against the homeowner.

Distressed property owners should consult with an attorney for specific advice.

All information contained herein was obtained from sources believed to be reliable, but cannot be guaranteed.
© Do not reproduce

 

All information contained herein was obtained from sources believed to be reliable, but cannot be guaranteed.

© Do not reproduce

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