ShortSaleCredit

How Will a Short Sale Affect My Credit?"

Your credit affects your ability to get financing and obtain favorable rates. A Short Sale will often
be reported to the credit reporting bureaus by the lender. Fannie Mae, the nation's largest
backer of mortgages, has announced recent favorable changes regarding its view of Short
Sales. The Fannie Mae policy indicates that Short Sales are preferable to Deed-in-Lieu of
Foreclosures and straight foreclosures.

The new policy guide, published June 25, 2008(excerpts):

A pre-foreclosure 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
pre-foreclosure sales, Fannie Mae is establishing a
2-year elapsed time period for reestablishing credit
following completion of the action.

Time Period After Pre-foreclosure Sale:
2-year time period from completion date. Additional Requirements: None

Deed-in-Lieu of Foreclosure: 4-year time period from completion date (date deed-in-lieu
executed) Additional requirements that apply after 4 years up to 7 years following completion
date: Borrower may purchase a property secured by a principal residence, second home, or
investment property with the greater of 10 percent minimum down payment or the minimum down
payment required for the transaction. Limited-cash-out and cash-out refinance transactions
secured by a principal residence, second home, or investment property are permitted pursuant
to the eligibility requirements in effect at that time. ** Note- 2 year time frame only applies with
"extenuating circumstances"

How does Foreclosure affect credit?

1.        Fannie Mae, the major federally chartered mortgage backer, will not allow borrowers with
a foreclosure to get another Fannie Mae-backed mortgage for 3-5 years, and only with a
minimum credit score of 680 (credit score requirements are changing, call your lender for current
requirmenets).

2.        Freddie Mac, federally chartered to support the secondary mortgage market, sees
foreclosure as a major negative on credit for seven years.

3.        FICO scores count foreclosures as nearly as bad as bankrupty.

4.        Freddie Mac and Fannie Mae loan applications include questioning the borrower on
whether they have ever had a foreclosure or deed-in-lieu of foreclosure. If so, the loan is more
critically analyzed, and may not be so easy to obtain.

In summary, a Short Sale is the best choice when it comes to ability to secure future
financing.