Here some
consideration you should take when thinking is it worth doing a short sale? Or
should I just give up and let the house go to foreclosure!!
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Issue
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Foreclosure
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Successful
Short Sale
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Future Fannie Mae Loan- Primary Residence (Effective
May 21,2008)
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A homeowner who loses a home to foreclosure is
ineligible for a Fannie Mae backed mortgage for a period of 5 years.
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A homeowner who successfully negotiated and closes a
short sale will be eligible for a Fannie Mae backed mortgage after only 2
years.
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Future Fannie Mae Loan- Non Primary Residence
(Effective May 21, 2008)
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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.
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An investor who successfully negotiated and closes a
short sale will be eligible for a Fannie Mae backed investment mortgage after
only 2 years.
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Future Loan with any Mortgage company
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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.
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There is no similar declaration, or question
regarding a short sale.
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Credit Score
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Score may be lowered anywhere from 150 to over 300
points. Typically, this will affect score for over 3 years.
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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 months.
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Credit History
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Foreclosure will remain as a public record on a
person’s credit history for 10 years or more.
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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.”
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Security Clearances
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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 clearance, in almost all cases,
clearance will be revoked and position will be terminated.
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A short sale, on its own, does not challenge most
security clearances.
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Current Employment
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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.
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A short sale is not reported on a credit report, and
is, therefore, not a challenge to employment.
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Future Employment
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Many employers are requesting credit checks on all
job applicants. A foreclosure is one of the most detrimental credit items on
applicant can have, and in most cases, will challenge employment.
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A short sale is not reported on a credit report, and
is, therefore, not challenge to employment.
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Deficiency judgment
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In 100% of foreclosure (except in those states where
there is no deficiency) the bank has the right to pursue a deficiency
judgment.
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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.
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Deficiency Judgment Amount
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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 sale price, and a longer time to sell in a declining
market. This will result in a higher possible deficiency judgment.
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In a property 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.
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As always feel free to connect with me!
