Foreclosure

Short Sale

Resident owner not eligible for a FNMA backed for 5 years

Eligible in 2 years

Investor owner not eligible for a FNMA backed loan for up to 7 years

Eligible in 2 years

On future credit applications one will have to answer YES to the question that asks. “Have you had a property foreclosed upon, or relinquished a “Deed in Lieu”

There are no such questions regarding relinquishment of a property by short sale.

A homeowner’s FICO Score may be lowered anywhere from 250 to 300 points or more.  One’s credit score will generally be adversely affected for up to 5 years.

Only late payments on mortgages will appear.  After the sale the debt is reported as “paid as agreed”, “paid as negotiated”, or “settled by compromise”, only lowering the score by 50 points or so.

A foreclosure can remain in one’s credit history records for up to 10 years

A short sale is not reported in one’s credit history.  It’s shown as a charge-off and its effect might last only 12 to 18 months.

Other than a serious misdemeanor or felony conviction, a foreclosure is a primary issue to obtaining (or keeping) a Security Clearance.  If one is a police officer, in the military, in the CIA, FBI or in any position requiring clearance, clearance is revoked and the position may be terminated.

A short sale does not challenge most security clearances in that there has been a bona fide offer and compromise regarding indebtedness. 

In other words, the loan was paid as agreed.

Employers are actively checking credit on employees in sensitive positions.  In many cases, a foreclosure can be a reason for immediate termination.

A short sale is not reported as a foreclosure on a credit report and is therefore not a challenge to employment.

Many employers are requiring credit check on all new employees and a foreclosure is one of the most detrimental entries one can have.

A short sale is not reported on a credit report and is therefore not a challenge to future employment.

In virtually all cases the bank has the right to pursue a deficiency judgment (and likely will) for the balance remaining owed after the foreclosure.

Our attorney is extremely successful in getting a full satisfaction of all the liens for the homeowners but there are no guarantees.  On our documentation, the homeowners can elect not to go through with the short sale in the event the lender does not allow a total and complete satisfaction of the entire debt.

A foreclosed-upon home has to go through the REO auction process.  If it doesn’t sell at the auction, a lower price will be accepted, resulting in a higher deficiency and, therefore, even more money owed.

In a properly managed short sale, the home is sold at a price that should be close to market value and in almost all instances will be superior to an REO sale and result in less deficiency.

One may avoid a deficiency judgment, prior to the foreclosure action by filling bankruptcy; however, bankruptcy cannot stop the imposition of federal and state income tax on Debt Relief.

A short sale can avoid income taxation on debt relief relative to the offer and compromise as well as the pursuit of a deficiency judgment.