Primary

Loan

A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a periods of 5 years

A homeowner who successfully negotiated and closed a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years

Non-Primary

Loans

An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae backed investment mortgagees for a period of 7 years

An investor who successfully negotiated and closed as short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Futures Loans

On any future 1003 application, a prospective borrower will have to answer yes on the standards 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.

Laws may change, be aware.

Credit

Score

Score may be lowered anywhere from 250 to over 300 points. Typically will affect scores for over 3 years

Only late payment will show and after a sale the mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points or more, if all other payments area being made. A short sale’s effect can be as brief as 12 to 18 months but as long as 3 years.

Credit

History

Foreclosure will remain as public record on a person credit history for 10 years of 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”.

It will show as a shortage amount!

Security

Clearances

Outside a conviction for a serious misdemeanor of felony, a foreclosure can be one of the most challenging issues against a security clearance. If a client has a foreclosure and is a police officer, in the military, CIA, or any other positions that requires a security clearance, in most cases clearance will be revoked and the position will be terminated.

A short sale on its own does not challenge MOST security clearances.

Current

Employment

Employers have the right to check the credit of all employees who are in sensitive positions. A foreclosure may be grounds for immediate reassignment or termination.

A sort 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 applications. A foreclosure is one of the most detrimental credit items an applicant can have.

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Deficiency

Judgment

In many states, depending on the kind of loan, the bank has the right to pursue a deficiency judgment.

Depending on the type of loan some lenders who accept a short sale may be able to pursue a borrower for a deficiency judgment. In many successful short sales it is possible to convince the lender to give up this right as part of the short sale. GET IT IN WRITING. You have agreed to pay back debt if not!