Short Sales – What you Need to Know

Issue	Foreclosure	Successful Short Sale
Future Fannie Mae Loan Primary Residence (Effective May 21, 2008)	A homeowner who loses a home to foreclosure in ineligible for a Fannie May backed mortgage for a period of 5 years.	A homeowner who successfully negotiations and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
Future Fannie Mae Loan Non Primary (Effective May 21, 2008)	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.	An investor who successfully negotiations a short sale will be eligible for a Fannie Mae backed investment mortgage after only 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	There is no similar declaration or question regarding a short sale.
Credit Score	Score may be lowered anywhere from 250 to 300 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 negotiation. This will lower the score 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 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 may be revoked.	A short sale on its own does not challenge most security clearances.