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ISSUE
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FORECLOSURE |
SUCCESSFUL SHORT SALE |
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Future Fannie Mae Loan Primary Residence
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A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae mortgage for 5 years.
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A homeowner who successfully negotiates & closes a short sale will be eligible for a Fannie Mae mortgage after only 2 years. |
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Future Fannie Mae
Loan-Non-Primary
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An investor who has a foreclosure is ineligible for a FannieMae investment mortgage for 7 years.
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An investor who closes a short sale will be eligible for a Fannie Mae investment back mortgage for only 2 years.
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Future Loan with any Mortgage Company
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On any future loan application, a borrower will have to answer YES to a question “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” This will affect future rates.
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There is no similar declaration or question regarding a short sale.
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Credit Score
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Score may be lowered anywhere from 250 to more than 300 points. Typically will affect a credit score for over 3 years.
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Only late payments on mortgage will show, & after sale, it’s normally reported as “paid as agreed,” “paid as negotiated” or “settled”. This can lower the credit score by 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months.
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| Credit History |
Foreclosure will remain as a public record permanently, & on a person’s credit history for 10 years or more.
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A short sale is not reported on a credit history. The loan is typically reported as “paid in full, settled.”
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| Security Clearance |
Foreclosure is the most challenging issue against a security clearance outside a serious misdemeanor or felony conviction. If a client has a foreclosure & 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 & position will be terminated.
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On its own, a short sale does not challenge most security clearances
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| Current Employment |
Employers have the right to check the credit of all employees who are in sensitive positions. In many cases, foreclosure is a reason for immediate reassignment or termination.
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A short sale is not reported on a credit report & is not a challenge to future employment.
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Future Employment
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Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items for an applicant can & in most cases will challenge employment. |
A short sale is not reported on a credit report & is not a challenge to future employment.
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Deficiency Judgment
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In 100% of foreclosures, the bank has the right to pursue a deficiency judgment.
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In some successful short sales, the Realtor can convince the lender to give up the right to pursue a deficiency judgment.
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Deficiency Judgment
(amount)
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In a foreclosure, the home will go through an REO process if it does not sell at auction. It may result in a lower sales price & longer time to sale in a declining market. This may result in a higher possible deficiency judgment.
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In a short sale, the home is sold close to market value, & in almost all cases will be better than an REO sale resulting in lower deficiency.
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