| Issue |
Foreclosure |
Successful Short Sale |
Future Fannie Mae Loan
primary residence
(effective 5/21/08) |
A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgaged 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 2 years |
Future Fannie Mae Loan
non-primary
(effective 5/21/08) |
An investor who allows a property to go to a foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years. |
An investory who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after 2 years. |
| 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. |
| Credit Score |
Score may be lowered anywhere from 250 to 300 or more points. Typically, this will affect a score for more than 3 years. |
Only late payments on a mortgage will show and an 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 effect can be as brief as 12 to 18 months. |
| Credit History |
Foreclosure will remain as a public record on a person's credit history for at least 10 years. |
A short sale is not reported on credit history. There is no specific reporting item for a "short sale." The loan is typically reported "paid in full, settled." |
| 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 or any other position that requires a security clearance, the clearance will be revoked and the position will be terminated. |
