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Future Fannie Mae
Loan - Primary
Residence
(effective May 21, 2008)
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A homeowner who loses a home to Foreclosure is
ineligible for a Fannie Mae backed mortgage for a
period of 5 years.
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A homeowner who successfully negotiates
and closes a short sale will be eligible for a
Fannie Mae backed mortgage only after 2
years.
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Future Fannie Mae
Loan - Non Primary
(effective May 21,
2008)
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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.
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An investor who successfully negotiates and
closes a short sale will be eligible for a Fannie
Mae backed investment mortgage after only 2
years.
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Future Loan with
any Mortgage
Company
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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.
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There are no similar declarations or question
regarding a short sale.
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Credit Score
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Score may be lowered anywhere from 250 to over
300 points. Typically will affect score for over 3
years.
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Only late payments on mortgage will show and
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 a brief as
12 to 18 months.
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Credit History
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Foreclosure will remain as a public record 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. There is no specific reporting item for
"short sale" The loan is typically reported "paid
in full, settled".
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Security Clearances
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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.
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A Short Sale on its own does not challenge
most security clearances.
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Current Employment
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Employers have the right and are actively and
regularly checking the credit of all employees who
are in sensitive positions. A foreclosure in many
cases is ground for immediate reassignment or
termination.
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A short sale is not reported on a credit report
and is therefore not a challenge to
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 an applicant can have and
in most cases will challenge employment.
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A short sale is not reported on a credit report
and is therefore not a challenge to
employment.
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Deficiency Judgment
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In 100% of foreclosures (except in those states
where there is no deficiency) the bank has the right
to pursue a deficiency judgment.
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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.
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Deficiency Judgment
(amount)
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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.
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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.
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