Foreclosure VS Short Sale Homeowner Consequences Part 1

Sep
25

Foreclosure VS Short Sale Homeowner Consequences Part 1

This is a 2 part post that covers facts regarding foreclosures and short sales and the consequences that come with it.

Foreclosure

FUTURE LOANS

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 loan application a prospective borrower will have to answer “YES” to question C in Section VIII that asks: “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” which will affect future rates.

CREDIT

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

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

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 ground for immediate reassignment or termination.

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

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.

DEFICIENCY JUDGMENT

In 100% of foreclosures the bank hast the right to pursue a deficiency judgment. Exception to this rule are states where there is no deficiency.

In a foreclosure the home will have to go through a REO process if it does not sell at auction. In most cases this will result in a lower sales price which will result in a higher possible deficiency judgment on the other hand.