Devery Cash

FORECLOSURE VS. SHORT SALE
HOMEOWNER CONSEQUENCES

Future Fannie Mae Loan- Primary Residence	A homeowner who loses their home to Foreclsoure is ineligible for a Fannie Mae back 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	An Investor who allows a property to go through foreclosure 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 propesctive borrower will have to answer YES to question C in Section VIII of the standard 1003 form that asks "Have you had propertey foreclosed upon or given title or deed in lieu thereof in the last 7 years?" This will adversly affect future interest rates.	Currently there is no similar declaration or question regading a short sale on the 1003 application.
Credit Score	Scores may be lowered anywhere from 250 to over 300 points.  Typically will affect credit score for as many as 3 or more years.	Only late payments on mortgages 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 affect can be as brief as 12 to 18 months.
Credit History	A foreclosure will remain as a public record on a person's credit history for 10 years or more.	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'.
Security Clearance	A foreclosure is the most challenging issue against a security clearance outside of a conviction of a felony or serious misdemeanor.  When a client has a foreclosure and is a police officer, in the CIA, in the military, in Security or any other position that requires a security clearance in almost all cases clearance will be revoked and the position will be terminated.	A Short Sale on its own does not challenge most security clearances.
Current Employment	Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions.  Foreclosures in many cases is grounds 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 the future employment.	A Short Sale is not reported on a credit report and is therefore not a challenge to employment.
Deficiency Judgement	In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgement.  Many banks are now pursuing that option.	In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgement against the homeowner.
Deficiency Judgement (amount)	In a foreclosure the, home will have to go through an REO process if it doesn not sell at auction.  In most cases this will result in a lower sales price and a longer time to sell in a declining market.  This will result in a higher possible deficiency judgement.	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.

Information provided by Distressed Property Institute, LLC and assumes no responsibility nor guarantees the accuracy of this document.  The Kittleson Real Estate Team, Inc. and The Distressed Property Institute, LLC are not engaged in the practice of law nor do they give legal advice.