| Issue: |
Foreclosure |
Short Sale |
| Credit History: |
Foreclosure will remain on your credit for 10 years and is permanent in the public records of your county and available in most counties to search online. |
A “short sale” is not reported on a credit history. There is no specific reporting item for it at this time. Upon Sale, your mortgage company will typically report the short sale as ‘Paid’, ‘Settled in Full’, or ‘Paid as Negotiated’ on your report. |
| Credit Score: |
Score may be lowered anywhere from 250 to over 300 points and will affect your score for over 3 years. |
Only late payments on your mortgage will show and after the short sale, it will be reported as paid or negotiated. Usually the late payments will lower your score 50 to 100 points if ALL OTHER CREDITOR payments are kept current. |
| Future Loan from ANY Mortgage Company: |
Any future Federally Mandated Standard Loan Application Form 1003 will require a “YES” answer to the question that asks, “have you had property foreclosed upon or given title or deed in lieu in the last 7 years?” This will also affect future loan rates. |
There are currently no similar declarations or question regarding a short sale. |
| Fannie Mae Effect: |
Ineligible for a Fannie Mae backed mortgage for a minimum period of 5 years. |
Eligible for Fannie Mae backed mortgage after only 2 years. |
| Deficiency Judgment: |
The bank has the right to pursue the deficiency judgment in all foreclosures (except in states which are non-recourse states) |
During the short sale process, you have the right to negotiate with your lender for alternative options for preventing a deficiency judgment. The terms of the short sale approval will be stated prior to closing in the lender’s short sale acceptance letter. |
| Security Clearance: |
Previously foreclosure was the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. Clearance can be revoked and position can be terminated. |
Currently a short sale on its own does not challenge most security clearances. |
| Current Employment: |
Your employer has the right and many times will actively check your credit if you are in sensitive positions. Sometimes a foreclosure is grounds for immediate reassignment or termination |
A short sale is not an actual item on your credit report and typically will NOT affect your current employment |
| Future Employment: |
Credit checks for employment are very common and 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 |
| Taxable Event to You for Unpaid Mortgage Balance? |
Depends on several factors and you must consult professional tax advice. |
Depends on several factors and you must consult professional tax advice. |