Foreclosure Vs. Short Sale

admin — Thu, 14 Apr 2011 05:29:25 +0000

Foreclosure	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 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.

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.

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 close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency.

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 (effective May 21, 2008)
An investor who allows a property to go to foreclosures 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, a 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 and typically will affect score for over 3 years.	Only late payments on a mortgage will show and after a short 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 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.	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.”

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admin — Wed, 18 Aug 2010 22:19:40 +0000

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SHORT SALE SOLUTIONS

Foreclosure Vs. Short Sale

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