Issue

Foreclosure

Successful Short Sale

Future Fannie Mae Loan - Primary Residence 

Ineligible for a Fannie Mae
backed mortgage for a period
of 5 years.

Can be eligible for a Fannie Mae backed mortgage after only 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.

Can be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Future Loan with any Mortgage Company 

A borrower will have to answer YES to Question C in Section VIII of the standard 1003 Mortgage Application that asks "Have you had property foreclosed upon or give 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 a
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
credit 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 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. 

Current Employment 

Employers have the right
and are actively checking the
credit history 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 s 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 close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency.