Here are some guideline's set up by Fannie Mae
Establishing a new policy for preforeclosure sales. A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satisfy the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer. Due to the increased incidence of preforeclosure sales, Fannie Mae is establishing a 2-year elapsed time period for reestablishing credit following completion of the action. Take a look at this chart below - downloaded from Fannie Mae
|
Action |
Current Requirements |
New Requirements |
|
Bankruptcy (All Except Chapter 13) |
4-year time period from discharge date |
The 4-year time period remains the same but will now be applied from either the discharge or dismissal date of the bankruptcy action. |
|
Foreclosure1 |
4-year time period from the date the foreclosure sale was completed ("completion date") |
5-year time period from completion date Additional requirements that apply after 5 years up to 7 years following completion date: • The purchase of a principal residence is permitted with a minimum 10 percent down payment and minimum representative credit score of 680. • Purchase of a second home or investment property is not
|
|
Time Period After Preforeclosure Sale (SHORT SALE) |
No existing policy |
2-year time period from completion date. Additional Requirements: None Note: No exceptions are permitted to the 2-year time period due to extenuating circumstances. |
Here are some excerpts taken from another view on Short Sales: I found this posted in a few different web sites, so i am not sure who the original author is - but I did research it myself and found it to be pretty accurate - Read Below.
There is a lot of misinformation concerning how a short sale or a foreclosure affects a FICO score. From doing some online research, the initial credit hit of a foreclosure and a shortsale are virtually the same. Credit experts report that there will be up to a 300 point credit hit when someone does a short sale or a foreclosure. However, the long term effects of either are radically different..
The main difference is how long the credit is damaged and if there will be any deficiency judgements.
Clear benefits of the short sale.
Fannie Mae recently established this new 2-year elapsed time period for reestablishing credit for homeowners who sell their homes through a short sale. Two years may seem like a long time to wait before being able to get a new loan, but compare this to what happens if the homeowner goes through the foreclosure process. According to the Fannie Mae guidelines, effective May 31, 2008, a homeowner who has filed a foreclosure will be "ineligible" for a loan for five years.
Again..this is a crucial point. Someone goes through foreclosure...no Fannie Mae backed mortgage for FIVE YEARS...in all reality that means that they will be renters for at least 5 years.
The other huge benefit of doing a short sale involves something called a deficiency judgment. When a house is sold at auction (foreclosure), the chances of the foreclosing lender filing a deficiency judgment increases dramatically.
How does this work?... , a deficiency judgment is obtained when a property is foreclosed and sold (usually at the courthouse by the clerk of the court) to the highest bidder. In most states a deficiency judgment can be obtained for the difference between the high bid and the higher foreclosure judgment amount. Usually the court determines which value is higher, the high bid or the appraised value of the property on the date of the public sale. The higher of the two is taken to determine the difference from the judgment amount, and this difference is the deficiency judgment (what was owed subtracted by the final sale price).
Deficiency judgments are just that: judgments. In other words, a debt that has to be paid. They are an albatross around the neck of the debtor and can only be removed by paying it off or by bankruptcy. Furthermore, deficiency judgments usually earn interest until paid.
If a homeowner has deficiency judgment, guess what? They won't be able to buy anything using credit. New house? Forget it. New car? Nope!
In the past few deficiency judgments have been filed against foreclosing homeowners, that may change. Banks seldom enforce deficiency judgments, they sell the judgments for 5 to 10 cents on the dollar. Here's the deal that the bank has to consider . . .for a $100,000 deficiency judgment they invest $500 in attorney fees and get $10,000 in return just for pushing paper. In other words, they get the judgement...then sell it to a 3rd party for 10% of the amount.
Realtors who know how to do short sales offer homeowners a way out. Whatever effect a short sale has versus a foreclosure on one's FICO score pales in comparison to the long term harm of a deficiency judgment and the inability to be approved for a loan for years to come.
If you are looking for someone experienced in this field - give me a call and we can talk about what all this means to you.
Aloha, and have a great day
Lance Owens (RS)
(808) 936-8383
Aloha Kona Realty Inc.
78-6740 Alii Drive
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