Homeowner Consequences Foreclosure A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. An investor who allows a property to go into Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years. On any future 1003 loan 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. Your credit score may be lowered anywhere from 250 to over 300 points. Typically will affect your score for over 3 years. Your credit history- A foreclosure will remain as a public record on a person's credit history for 10 years or more. Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If you have a foreclosure and you are 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 postion will be terminated. Current 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 ground for immediate reassignment or termination. 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. In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgement. 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 judgement. Successful Short Sale A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years. An investor who sucessfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years. There is no diclaration or question regarding a short sale on a future loan application. You do not have to answer yes on a 1003 loan application about a short sale. Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower your credit 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. 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, etc. A short sale on it's own does not challenge most security clearances. A short sale is not reported on a credit report and is therefore not a challenge to employment. In some successful short sales, it is possible to convince the lender to give up the right to pursuit a deficiency judgement against the homeowner. In a property 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 any. Call Me: Janene Spencer-Zweng the Certified Distressed Property Expert so I can help you in the decision process if a short sale is right for you. There are also ways where you can stay in your home and avoid foreclosure. Don't become another foreclosure victim... I am here to help! References available. RE/MAX Platinum
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