Pensacola foreclosure and short sale

Foreclosure vs Short Sale

What are the Consequences?

Issue: Future Fannie Mae LoanPrimary Residence

(effective May 21, 2008)

A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed 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.

Issue: Future Fannie Mae Loan –Non Primary Residence

(effective May 21, 2008)

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.

An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Issue: Future Loan with any Mortgage Company

On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this will affect future rates.

There is no similar declaration or question regarding a short sale.

Issue: Credit Score

With a foreclosure, Credit Score Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.

With a sucessful short sale, only late payments on mortgage will show.  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 a brief as 12 to 18 months.

Issue: Credit History

 Foreclosure will remain as a public record on a person’s credit history for 10 years or more.

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’.

Issue: Security Clearances

 Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.

A Short Sale on its own does not challenge most security clearances.

Issue: Current Employment

Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is a ground for immediate reassignment or termination.

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

Issue: 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 employment.

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

Issue: Deficiency Judgment

In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment.

In some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.

Issue: Deficiency Judgment - Amount

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 sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment.

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.

If your are delinquent on your mortgage payments, there may still be time to prevent foreclosure.  Call The Bernie Mostoller Team of real estate professionals for a confidential interview to determine the best course regarding your mortgage, your credit future, and the issues listed above.  Call 850-202-TMGR (850-202-8647) or email bernie@themostollergroup.com

Reprinted with permission. The Distressed Property Institute, LLC assumes no responsibility nor guarantees the accuracy of this document. The Distressed Property Institute, LLC is not engaged in the practice of law nor give legal advice.

© Distressed Property Institute, LLC 2008. All rights reserved. Any duplication without express written consent is prohibited.

 

Contact Information

Photo of Bernie Real Estate
Bernie
Pensacola Bay Realty
201 E. Government St. #8
Pensacola FL 32502
850-572-1258
850-202-8647
Fax: 850-433-6222

Bernie Mostoller, CRS,GRI,SRES,CDPE
Broker/Owner

Pensacola Bay Realty
201 E. Government Street, Pensacola, FL 32502
877-822-5542  Toll Free * 850-202-8647 Office * 850-572-1258 Direct * 850-433-6222 Fax