Short Sale vs Foreclosure


  Future Fannie Mae  A homeowner who loses a home to  A homeowner who successfully
   Loan ? Primary  Foreclosure is ineligible for a Fannie Mae  negotiates and closes a short sale will
  Residence  backed mortgage for a period of   be eligible for a Fannie Mae backed
  (effective May 21, 2008)  5 years.  mortgage after only 2 years.
  Future Fannie Mae  An Investor who allows a property  An investor who successfully negotiates
  Loan ? Non Primary  to go to Foreclosure is ineligible for  and closes a short sale will be eligible
  (effective May 21, 2008)  a Fannie Mae backed investment  for a Fannie Mae backed investment
   mortgage for a period of 7 years.  mortgage after only 2 years.
  Credit Score  Score may be lowered anywhere  In some cases only late payments on
   from 250 to over 300 points.  mortgage will show and after sale the
   Typically will affect score for over  mortgage will be reported as paid or
   3 years.  negotiated. This will lower the score as
    little as 100 points if all other payments
    are being made. In some states default
    can be reported as a foreclosure,
    however at this time a short sale
    instead of a foreclosure will affect a 
    borrower much less. A short sale?s
    affect can be as brief as 12-18 months.
  Credit History  Foreclosure will remain as a public  A Short Sale is not reported on a
   record on a person?s credit history for  persons credit history. There is
   10 years or more.  no specific reporting item for a ?short
    sale?. In most cases a loan is typically
    reported ?paid in full, settled? or ?paid
    as negotiated?.
  Current  Employers have the right and are  A short sale is not reported on a
  Employment  actively checking the credit regularly  credit report and is therefore not a
   of all employees who are in sensitive  challenge to employment.
   positions. A foreclosure in many 
   cases is ground for immediate 
   reassignment or termination. 
  Security  Foreclosure is the most challenging  A Short Sale on its own does not
  Clearances  issue against a security clearance  challenge most security clearances.
   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. 
  Deficiency  In 100% of foreclosures (except in those  In most successful short sales it
  Judgment  states where there is no deficiency) the  is possible the lender will give up
   bank has the right to pursue a deficiency  the right to pursuit a deficiency 
   judgment. In some successful short sales  judgment against the homeowner.
   it is possible to convince the lender to  
   give up the right to pursuit a deficiency 
   judgment against the homeowner. 
  Deficiency  In a foreclosure the home will have to go  In a properly managed short sale the
  Judgment (Amount)  through an REO process if it does not sell  home is sold at a price that should be
   at auction. In most cases this will result  close to market value and in almost all
   in a lower sales price and longer time to  cases will be better than an REO sale
   sale in a declining market. This will result  resulting in a lower deficiency.
   in a higher possible deficiency judgment. 
   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. 

Government Stimlus Plan
There are several plans offered by the federal government to help homeowners avoid foreclosures, including FHASecure and Hope for Homeowners. These these programs only work if you do not already have a FHA loan. The most recent program to be announced is the Homeowner Affordability and Stability Plan, which is aimed at helping homeowners refinance their mortgages to lower their mortgage payments. Homeowners might qualify for a refinance at a 15- or 30-year fixed-market-interest-rate. 
Make sure you research your options before you let your home get foreclosure on.

Candace Kunkel CRS, GRI, CDPE | Business: 316-775-6683
RE/MAX On The Move | 411 State St - Augusta, KS 67010 | Office: 316-775-6683
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