Bad short sale info hurting buyers’ credit scores

U.S. Sen. Bill Nelson (D-Fla.) says a technicality is blocking some home buyers from participating in the housing market: Many distressed borrowers who sold their homes in a short sale – for less than the mortgage balance during the housing meltdown – are now eligible to purchase again, but incorrect information makes it difficult.

According to Nelson, creditors and credit unions incorrectly coded their short-sale transaction as a foreclosure on their credit scores, and foreclosures impact a consumer’s credit more than a short sale does. It could be a simple coding error inputting information, but so far, that’s only a theory.

“I have put the federal government on notice,” Nelson threatened. “If they don’t do something to straighten things out in the next two months, I’m going to ask the president to start firing people in (the Consumer Financial Protection Bureau and the Federal Trade Commission).” Nelson says he notified the Senate Commerce Committee this month, but no one seems able to explain why the problem exists.

If no solution is devised, he warned, “We’re going to have a serious diminution of our ability to turn over real estate sales.”