Foreclosure vs Short Sale

The six new Arizona real estate laws you should know
Here's a recap from the Arizona Association of Realtors of the six new state laws that could have the biggest impact on the real estate industry and homeowners. The laws went into effect on July 31st.
HB2345: Homeowner associations are prohibited from banning the display of temporary open house signs, except in common areas. HOAs are also prohibited from regulating a seller's “for sale” sign if it meets industry standards.
HB2371: Swimming pools and spas are now part of home inspections.
HB2450: Municipalities aren't allowed to refuse service or require payment for unpaid water and wastewater services from anyone besides the person ...

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A Phoenix minister and mortgage broker convicted in foreclosure scam
A minister and former Phoenix mortgage broker has been convicted of 10 charges related to foreclosure-aid scheme.
Edward L. Carpenter, 52, was found guilty this week by a Maricopa County Superior Court jury of 10 felony fraud charges related to his mortgage "rescue" business.
According to court documents, Carpenter contacted homeowners and falsely said he ran a "mortgage elimination" business that could legally remove borrowers names from their mortgages, giving them ownership of the properties free and clear. He charged up-front fees of $1,000 or more.
Carpenters' filings were designed to cloud the title, confuse title companies and cause mortgage companies ...

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Drop in pending loan modifications for metro Phoenix homeowners
Lenders have permanently modified the mortgages of 18,409 metropolitan Phoenix homeowners through the federal government's program to help people avoid foreclosure. That's the tally so far for the Making Home Affordable Program launched in the spring of 2009.
Permanent loan modifications in metro Phoenix have climbed by 2,000 to 3,000 for each of the past few months. Foreclosures in the region have climbed by at least 4,000 a month so far this year.
What changed in July was the number of trial mortgage modifications fell significantly. At the end of July, there were 9,735 trial loan modifications underway in the region, down ...

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Phoenix foreclosure help for pets
To save the growing number of pets adandoned in foreclosure homes, a group of metro Phoenix real estate agents has formed the Lost Our Home Pet Foundation. The nonprofit's goal is to rescue pets left behind after their owners lose homes to foreclosure or eviction.
“We know that in order for us to help the vast numbers of pets in need, we also need to help pet owners by providing a variety of immediate, convenient and available services,” said Jodi Polanski, founder of Lost Our Home, which operates a pet food bank for people who can no longer afford to feed their animals.
The nonprofit also has a ...

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Pair convicted in Phoenix mortgage fraud scam
A Phoenix couple has been convicted for their part in a cash-back,
mortgage fraud scam that resulted in $6.6 million in losses and the
foreclosure of 25 Valley homes.
Samuel T. Dobos, 30, and Georgiana Dobos, 28 were each recently
sentenced to 27 months in prison for their roles in the scheme, which
involved straw buyers. The couple has also been ordered to pay
$220,000 in restitution.
Mortgage fraud during the boom worked to inflate home prices and then
drive up foreclosures during the downturn. Arizona is now among the
top five states nationally for mortgage fraud.
Arizona regulators and prosecutors formed a state mortgage fraud task
force in 2007.
“The Dobos’ ...

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There are major differences in completing a short sale than going into foreclosure

ISSUE

FORECLOSURE

SUCCESSFUL SHORT SALE

Future Fannie Mae Loan-

Primary Residence

A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.

A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Fannie Mae Loan-

Non Primary

An investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.

An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Future Loan with any Mortgage Company

On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this will affect future rates.

There is no similar declaration or question regarding a short sale.

Credit Score

Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 5 years.

Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated.  This will lower the score as little as50 points if all other payments are being made.  A short sale’s affect can be a brief as 12 to 18 months.

Credit History

Foreclosure will remain as a public record on a person’s credit history for 10 years or more.

Short sale is not reported on a credit history.  There is no specific reporting item for ‘short sale’.  The loan is typically reported ‘paid in full, settled’.

Security Clearances

Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony.  If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.

A Short Sale on its own does not challenge most security clearances.

Current Employment

Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions.  A foreclosure in many cases is ground for immediate reassignment or termination.

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Future Employment

Many employers are requiring credit checks on all job applicants.  A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.

A short sale is not reported on a credit report and is therefore not a challenge to employment.