Earl Richards

 

             FORECLOSURE VS. SHORT SALE
              Homeowner Consequences
        ISSUE                                  FORECLOSURE                             SUCCESSFUL SHORT SALE
Future Fannie Mae Loans-A home owner who loses a home to ForeclosureA homeowner who successfully negotiates and closes 
Primary Residenceis ineligible for a Fannie Mae backed mortgage for a short sale will be eligible for a Fannie Mae mortgage 
 a period of 5-7 yearsafter only 4 years. (sometimes after 18 months)
Future Fannie Mae Loan-An investor who allows a property to An investor who successfully negotiates and closes a  
Non-Primarygo to Foreclosure is ineligible for a Fannie  Maeshort sale will be eligible for a Fannie Mae backed
 backed investment mortgage for a period of 7 years.investment mortgage after only  2-4 years
Future Loan with anyOn any future 1003 Application, a prospectiveThe is no similar declaration or question regarding a 
Mortgage Companyborrower will have to answer YES to question Cshort sale
 in Sec. VIII of the standard 1003 that asks "Have 
 you ever had property foreclosed upon or given  
 title or deed in lieu therof in the last 7 years?" this 
 will affect future rates. 
Credit ScoreScore may be lowered anywhere from 250 to overOnly late payments on mortgage will show and after
 300 points. Typically will affect score for over 3  sale mortgage will be reported as paid or negotiated.
 years.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 12-18 months.
Credit HistoryForeclosure will remain as a public record on a Short sale is not reported on a credit history. There is 
 person's credit history for 10 years or more.no specific reporting item for "short sale". The loan is 
  typically reported "paid in full, settled account for 
  less than full value".
Future EmploymentMany employers are requiring credit checks on allA short sale is not reported on a credit report and is 
 job applicants. A foreclosure is one of the most  therefore not a challenge to employment.
 detrimental credit items an applicant can have and 
  in most cases will chanllenge employment. 
Deficiciency JudgmentIn 100% of foreclosures (except in those states In some successful short sales it is possible to 
 where there is no deficiency) the bank has the right convince the lender to give up the right to pursue a 
 to pursue a deficiency judgment.deficiency judgement against the homeowner.
Deficiency Judgment-In a foreclosure the home will have to go through In a properly managed short sale, the home is sold at a 
Amountan REO process if it does not sell at auction. In price that should be close to market value and in almost 
 most cases this will result in lower sales price andall cases will be better than an REO sale sesulting in a 
 longer time to sale in a declinging market. This willlower deficiency.
  result in a higher deficiency judgment. 
     Earl Richards, Prudential California Realty
     Broker/Associate
     818 321-8333
     elrich50@msn.com