Homeowner Consequences

Successful Short Sale

Foreclosure

A homeowner (Primary Residence) who successfully negotiates and closes a short sale

will be eligible for a Fannie Mae-backed

mortgage after only 2 years

A homeowner (Primary Residence) who loses a home to foreclosure is ineligible for a

Fannie Mae-backed mortgage for

a period of 5 years .

An investor (non-primary residence) who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed investment

mortgage after only 2 years .

An investor (non-primary residence) who allows a property to go to foreclosure is ineligible for

a Fannie Mae-backed investment

mortgage for a period of 7 years .

There is no similar declaration or

question regarding a short sale.

On any future application, a

prospective borrower will have to

answer YES to question C in Section

VIII of the standard 1003 form 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.

Only late payments on mortgage will show,

and after sale, mortgage is normally

reported as ‘paid as agreed’, ‘paid as

negotiated’, or ‘settled’. This can lower

the credit 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 Score may be lowered anywhere

from 250 to more than 300 points .

Typically will affect a credit score

for over 3 years .

A 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’.

Foreclosure will remain as a

public record permanently, and

on a person’s credit history for

10 years or more.

On its own, a short sale does not

challenge most security clearances

Foreclosure is the most challenging

issue against a security clearance

outside a serious misdemeanor or

felony conviction. 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 is not reported on a

credit report and is therefore not

a challenge to employment.

Employers have the right and are

actively checking the credit of all

employees who are in sensitive

positions. In many cases, a

foreclosure is reason for immediate

reassignment or termination.

In some successful short sales, it is

possible to convince the lender

to give up the right to pursue a

deficiency judgmen t against the

homeowner.

In 100% of foreclosures (except in

those states where there is no

deficiency), the bank has the right

to pursue a 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.

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.