There is, I think, a bill that has been approved by the House and is before the Senate or may even be on the Pres’s desk for signature that waives the tax liability for debt relief. Of course, insolvency will qualify you for a waiver from the IRS for any tax associated with debt relief. I’m not sure how the state with income taxes feel about that.

Short sales have a window. Typically, if the sale cannot be consummated in a reasonable period of time, the lender forecloses anyway.

Your question about credit scores and renting is a good one. The answer may lie in the landlord’s perception of the risk. If I were considering leasing to someone with a short sale, I would look harder at credit prior to the short sale, at the borrower’s job and income, and at how the problem came to be.

How is the credit hit affecting people who then have to go find a rental?

I had forwarded a flyer from a title company quoting another local lender and predicting only an 80-100 point drop in Fico scores from a short sales vs. a 200-250 point drop from a foreclosures.

At first she said it was true, citing as evidence “industry statistics”. Later she indicated that it was mainly anecdotal evidence from home owners currently going through the process. What?

It’s hard to imagine that the there is enough data to yet draw that conclusion. And I suspect that there are other factors at work, like whether the homeowner has been current on payments up to the event.

Most people that I speak with who are considering a short sale are frustrated to contact the lender and be told that they must first default on a payment before the lender will talk. In other words, they are current on their mortgage at the time.

Once people decide to go to foreclosure, most have given up on other options and simply stop making payments. A series of late payments ensues, followed eventually by a Notice of Default. That could certainly be harder on your scores.

In the end, Fico scores aside, once a new lender learns you’ve had a short sale, don’t count on getting a mortgage for at least 2 years, and then it will depend on how quickly your scores bounce back.

I don’t know if that’s a “screw you” or just a stall tactic on the part of the lenders. There are certainly other ways they can tell if you’re unable to make your payments.

What I can tell you is that there is increasing pressure on lenders to work pro-actively with homeowners. Lenders who have previously set up counseling centers (sounds good) but then dispensed worthless and stupid advise like “get a roommate”, or “go find a 2nd job” are being ripped now in the press. Check out www.Countrywidehomeloansucks.com . With enough of this sentiment, lenders will come around. Hang on if you can.