While it may not seem like it now, there will
come a time when your current financial troubles
will pass. You will feel much better knowing
that you did everything you could to avoid this
devastating financial consequence. The chance at
avoiding foreclosure takes only effort and
cooperation on your part. As your agents, we
will do all the rest, and invest our time,
money, and effort.
|
Issue |
Foreclosure |
Successful
Short Sale |
|
Future Fannie Mae Loan – Primary
Residence (Effective May 21, 2008) |
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 after
only 2 years. |
|
Future Fannie Mae Loan – Non Primary
Residence (Effective May 21, 2008) |
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 Application (Standard
Loan Application), a prospective
borrower will have to answer YES
to question C, in Section VIII, that
asks, “Have you had property foreclosed
upon, or given title or deed in lieu
thereof?” This will affect all 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,
this 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 effect can
be as 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. |
A
short sale is not reported on a
credit history. There is no specific
reporting item for “short sale.” The
loan is typically reported as “Paid in
full, settled.” |
|
Security Clearances |
Foreclosure is the most challenging
issue against a security clearance,
outside of a conviction for a serious
misdemeanor or felony. If a client has a
foreclosure, and is a police officer, in
the military, a government employee, a
security officer, or any 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 and regularly checking the
credit of all employees who are in
sensitive positions. A foreclosure,
in many cases, is grounds 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 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
a longer time to sell 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 close
to market value, and, in almost all
cases, will be better than an REO sale,
resulting in a lower deficiency
amount. |
