Comments on: Short Sales vs. Foreclosures….Your Credit Will Suck Either Way http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/ Home loans made easy Fri, 21 Nov 2008 19:40:29 +0000 http://wordpress.org/?v=2.3 By: Marc http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-17023 Marc Sat, 08 Nov 2008 22:48:39 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-17023 <html>Mariana, short sales during the 1990's recession were viewed <b><em>exactly</b></em> like a foreclosure from a credit standpoint. That was before we began using credit scores. As the recent crisis built, that old experience was the only precedent we had to work with. There is an emerging but subtle distinction this time around. While Fannie Mae has increased to 5 years the elapsed time required between a foreclosure and and a new mortgage, it will consider a new mortgage after only 2 years for a short sale. Freddie Mac has not yet followed suit that I'm aware of. There is also some suggestion that the credit scoring models may be more lenient toward short sales. Some of the claims I've heard made about foreclosures being harder on credit scores may be because people often get further behind on the mortgage, triggering a Notice of Default (NOD)and then running up credit cards and occasionally filing bankruptcy. The worse the accumulated damage, the lower the scores will fall. Mariana, short sales during the 1990’s recession were viewed exactly like a foreclosure from a credit standpoint. That was before we began using credit scores. As the recent crisis built, that old experience was the only precedent we had to work with.

There is an emerging but subtle distinction this time around. While Fannie Mae has increased to 5 years the elapsed time required between a foreclosure and and a new mortgage, it will consider a new mortgage after only 2 years for a short sale. Freddie Mac has not yet followed suit that I’m aware of.

There is also some suggestion that the credit scoring models may be more lenient toward short sales. Some of the claims I’ve heard made about foreclosures being harder on credit scores may be because people often get further behind on the mortgage, triggering a Notice of Default (NOD)and then running up credit cards and occasionally filing bankruptcy. The worse the accumulated damage, the lower the scores will fall.

]]> By: Mariana http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-16878 Mariana Tue, 21 Oct 2008 23:16:55 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-16878 ... also, in the current market (which is MUCH different from when this post was written), lenders may work with an owner so that they (sellers) are not liable for the deficiency. Not so with a foreclosure ... unless a bankruptcy is in play. … also, in the current market (which is MUCH different from when this post was written), lenders may work with an owner so that they (sellers) are not liable for the deficiency. Not so with a foreclosure … unless a bankruptcy is in play.

]]> By: Mariana http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-16877 Mariana Tue, 21 Oct 2008 23:14:11 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-16877 A short sale is not a foreclosure. A short sale generally hit credit for as many late payments that happened before the home sold. A person can recover from a short sale. A foreclosure is a permanent red mark that can keep a person from EVER being a home owner again. A short sale is not a foreclosure. A short sale generally hit credit for as many late payments that happened before the home sold. A person can recover from a short sale.

A foreclosure is a permanent red mark that can keep a person from EVER being a home owner again.

]]> By: Melanie http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14744 Melanie Sun, 10 Aug 2008 23:15:11 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14744 Marc, We are in the same boat as many. We own a home in CA but live in TX. We currently have a renter in the home in CA but our (bleep) lender just increased our rate by 1.50% and it's now 9.25. This increased our payments to just under $3k/month and we are having to cover a little more then half of the mortgage. We are barely keeping our head above water and are considering walking away from the house when the renters lease is up in two months. I'm not one of those greedy LL that collects the rent for 6 months without making a mtg payment and leaving the renters homeless. We owe $324k and it appraises for $220k (ouch I know) We also have about $20k in cc debit. What do you think would be best for us to do? Just foreclose or file bankruptcy? Which is "better" on your credit and will give us a better chance on buying again? Do I have to pay taxes if we foreclose? Also, if we do foreclose when do we stop paying the property taxes and is it possible to get the money back from the lender that is in my escrow account? Thanks! Marc,
We are in the same boat as many. We own a home in CA but live in TX. We currently have a renter in the home in CA but our (bleep) lender just increased our rate by 1.50% and it’s now 9.25. This increased our payments to just under $3k/month and we are having to cover a little more then half of the mortgage. We are barely keeping our head above water and are considering walking away from the house when the renters lease is up in two months. I’m not one of those greedy LL that collects the rent for 6 months without making a mtg payment and leaving the renters homeless.

We owe $324k and it appraises for $220k (ouch I know) We also have about $20k in cc debit. What do you think would be best for us to do? Just foreclose or file bankruptcy? Which is “better” on your credit and will give us a better chance on buying again? Do I have to pay taxes if we foreclose? Also, if we do foreclose when do we stop paying the property taxes and is it possible to get the money back from the lender that is in my escrow account?

Thanks!

]]> By: mick http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14563 mick Mon, 28 Jul 2008 23:15:26 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14563 Marc, Wife & I are in a similar boat (make it a life boat) to the folks at postings 48 & 49 above... 1-We have a 1st Mtg. (down to $156k fm 168k originally, been slapping extra toward principal every month, for YEARS...for now apparently nothing?)w/Countrywide (&we are current, so dealing w/customer service means INDIA right now) 2-We have a HELOC 2nd also thru CW, for $73k, which they "froze" in Feb., we've tiled, added hardwoods, redone the kitchen & baths, crown molding, the works. We moved 2+ yrs ago when we had it under contract, however that 1 fell thru, & ZERO have followed (no offers, no lookers). This past friday, both my RE Agent & Appraiser tell me "The house might be able to get sold for around "$150k.....maybe?"....I just stared at them in dumb shock. Last appraisal had been $249k, & that was early '06. I wanted CW to simply WRITE OFF the 2nd & do a short sale on the 1st, suffering a minimal loss, of course that set as well as an alligator in an elevator with them earlier today... So now I want to deed in lieu of foreclosure the place back to them. If they want to be idiots and inherit MORE REO...so be it. I was willing to even hang in there paying the 1st (& paying it down), however they blew me off. Now the wife is pissed and wants out...wants to know who we send the keys to, where we sign, they can have it good riddence to stupid "negotiators". Contact an attorney? Our Accountant? What are our ramifications w/the HELOC if we simply send them "jingle mail" (Deed in Lieu completed & notarized paperwork while still current & the KEYS)? Please keep in mind we HAVE our dream house for now and plan on staying here at least a couple years to come...credit, schmedit, I'm a mortgage broker & have been for a decade, never wrote a single POO Loan, never a Neg.Am loan, (& probably still have a license because I walked away from a TON of potential mort.fraud at every turn in '05, '06, & '07)& have zero regrets, just never thought we'd get caught in this mess along with all the other refugees out there...at least we have another home, it is mind boggling to have had a place that was worth $249k, to have added $60k in costs for materials to IT, and now it be worth less than before the hundreds of hours and all those materials? I'm over it, I just want to be sure they can't pursue us via judgment in Florida for the HELOC? Marc,
Wife & I are in a similar boat (make it a life boat) to the folks at postings 48 & 49 above…
1-We have a 1st Mtg. (down to $156k fm 168k originally, been slapping extra toward principal every month, for YEARS…for now apparently nothing?)w/Countrywide (&we are current, so dealing w/customer service means INDIA right now)
2-We have a HELOC 2nd also thru CW, for $73k, which they “froze” in Feb., we’ve tiled, added hardwoods, redone the kitchen & baths, crown molding, the works. We moved 2+ yrs ago when we had it under contract, however that 1 fell thru, & ZERO have followed (no offers, no lookers). This past friday, both my RE Agent & Appraiser tell me “The house might be able to get sold for around “$150k…..maybe?”….I just stared at them in dumb shock. Last appraisal had been $249k, & that was early ‘06.

I wanted CW to simply WRITE OFF the 2nd & do a short sale on the 1st, suffering a minimal loss, of course that set as well as an alligator in an elevator with them earlier today…

So now I want to deed in lieu of foreclosure the place back to them. If they want to be idiots and inherit MORE REO…so be it. I was willing to even hang in there paying the 1st (& paying it down), however they blew me off. Now the wife is pissed and wants out…wants to know who we send the keys to, where we sign, they can have it good riddence to stupid “negotiators”. Contact an attorney? Our Accountant? What are our ramifications w/the HELOC if we simply send them “jingle mail” (Deed in Lieu completed & notarized paperwork while still current & the KEYS)?
Please keep in mind we HAVE our dream house for now and plan on staying here at least a couple years to come…credit, schmedit, I’m a mortgage broker & have been for a decade, never wrote a single POO Loan, never a Neg.Am loan, (& probably still have a license because I walked away from a TON of potential mort.fraud at every turn in ‘05, ‘06, & ‘07)& have zero regrets, just never thought we’d get caught in this mess along with all the other refugees out there…at least we have another home, it is mind boggling to have had a place that was worth $249k, to have added $60k in costs for materials to IT, and now it be worth less than before the hundreds of hours and all those materials? I’m over it, I just want to be sure they can’t pursue us via judgment in Florida for the HELOC?

]]> By: cynthia artz http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14495 cynthia artz Tue, 22 Jul 2008 19:52:34 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14495 I have a 1st and a 2nd mort. as well as a heloc loan with the same lender that holds my 2nd mort. If I foreclose am I still responsible for paying off the heloc loan (we did open that after the purchase of the home) or is that considered part of the foreclosure????? I have a 1st and a 2nd mort. as well as a heloc loan with the same lender that holds my 2nd mort. If I foreclose am I still responsible for paying off the heloc loan (we did open that after the purchase of the home) or is that considered part of the foreclosure?????

]]> By: cynthia artz http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14342 cynthia artz Tue, 15 Jul 2008 19:47:42 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14342 Marc I have a 1st and 2nd mortgage as well a Heloc loan with the same lender that holds my 2nd mtg. If I foreclose am I respondsible for paying off the heloc loan after forclosure (we did open the Heloc after we purchased the home ?) cynthia Marc
I have a 1st and 2nd mortgage as well a Heloc loan with the same lender that holds my 2nd mtg. If I foreclose am I respondsible for paying off the heloc loan after forclosure (we did open the Heloc after we purchased the home ?)

cynthia

]]> By: Marc http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14334 Marc Mon, 14 Jul 2008 15:04:50 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14334 Craig, There is a lot speculation and uncertainty surrounding these issues, and Realtors have an ax to grind--they make a commission on a short-sale and they get nothing on a foreclosure. Short sales are also very difficult and most buyers in here in Sacramento CA don't pursue them. Banks here are subject to a "single action" rule, which means they can choose either to sue for a deficienty judgement or foreclose and take the property. They seem consistenly to elect the second option, although if you have a 1st and a 2nd, the second lien holder could still sue even if the 1st doesn't. I don't know what recourse is permitted by the laws of Michigan, but you need to get some qualified legal and tax advice before you make the decision. I try to confine my comments to the effect on your credit of one or the other. Recently, Fannie Mae announced that it would consider you for a mortgage two years after a short sale but five years after a foreclosure, subject to credit scores at the time. That suggests that from a credit standpoint, a short sale may be preferable. Good luck, and sorry about your troubles. Craig,

There is a lot speculation and uncertainty surrounding these issues, and Realtors have an ax to grind–they make a commission on a short-sale and they get nothing on a foreclosure. Short sales are also very difficult and most buyers in here in Sacramento CA don’t pursue them.

Banks here are subject to a “single action” rule, which means they can choose either to sue for a deficienty judgement or foreclose and take the property. They seem consistenly to elect the second option, although if you have a 1st and a 2nd, the second lien holder could still sue even if the 1st doesn’t.

I don’t know what recourse is permitted by the laws of Michigan, but you need to get some qualified legal and tax advice before you make the decision. I try to confine my comments to the effect on your credit of one or the other. Recently, Fannie Mae announced that it would consider you for a mortgage two years after a short sale but five years after a foreclosure, subject to credit scores at the time. That suggests that from a credit standpoint, a short sale may be preferable.

Good luck, and sorry about your troubles.

]]> By: Craig Casler http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14318 Craig Casler Fri, 11 Jul 2008 12:17:49 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-14318 Hello Marc, I currently have a condo in Michigan that I am renting out because I am unable to sell it. I have a real estate agent setting it up for a Short Sale now. He stated that a Short Sale would not affect my credit as much as a foreclosure would. He also stated that if I do foreclose, there is a chance that the bank could come back later and sue me for the balance. Is this true? Hello Marc,
I currently have a condo in Michigan that I am renting out because I am unable to sell it. I have a real estate agent setting it up for a Short Sale now. He stated that a Short Sale would not affect my credit as much as a foreclosure would. He also stated that if I do foreclose, there is a chance that the bank could come back later and sue me for the balance. Is this true?

]]> By: Marc Brinitzer http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-13784 Marc Brinitzer Fri, 09 May 2008 00:04:43 +0000 http://www.lendingclarity.com/2006/12/22/short-sales-vs-foreclosuresyour-credit-will-suck-either-way/#comment-13784 Cynthia, Either lender can foreclose if you are in default of their loan. You always have the opportunity to bring the loan current, but if you cannot do that and if they won't help you out, you're probably going to lose the house Cynthia,

Either lender can foreclose if you are in default of their loan. You always have the opportunity to bring the loan current, but if you cannot do that and if they won’t help you out, you’re probably going to lose the house

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