The preceding article, Unable To Keep Your Bradley Beach Home? Here Is What’s Next, explained the procedures for short sales and foreclosures. In this installment the two will be compared in terms of ramifications and consequences. Of greatest concern to the owner of Jersey Shore real estate who is losing his/her home are the effects on credit ratings and future loan availability. Those facing such a loss, however, should also take into consideration security clearance, employment, taxes, and deficiency judgments. The last two will be discussed in the next issue.

CREDIT RATING/HISTORY:

Short sale:

  • Only late payments on the mortgage of Jersey Shore real estate will be reflected. After the sale, the mortgage will be reported as paid or settled.
  • If all other payments are being made, the credit score could drop by as little as 50 points. Note that it is the late payments, not the short sale, that adversely affects the score.
  • The short sale is not recorded in the credit history.

Foreclosure:

  • Can affect the credit score from 250-300+ points for over 3 years.
  • Will remain on the credit history for 10+ years.

LOAN AVAILABILITY:

Short sale:

  • The homeowner or investor in Jersey Shore real estate whose payments were in default will be eligible for a Fannie Mae mortgage after 2 years.
  • In some cases Fannie Mae allows a non-defaulting seller to immediately apply for a new mortgage.
  • FHA guidelines say that after a short sale a seller who is current in payments may qualify immediately. However, in reality many lenders are reluctant to approve another loan at a reasonable interest rate until 2 years has elapsed.

Foreclosure:

  • Fannie Mae will not acknowledge homeowner eligibility for 5 years. For investors the waiting period is 7 years.
  • On any future loan applications an owner whose property has been foreclosed must disclose this fact in Section VIII. Such a declaration can have a negative effect on the interest rate offered.

SECURITY CLEARANCE:

Short sale:

  • Generally has no impact on the clearance.

Foreclosure:

  • In almost all cases a foreclosure provides cause for the termination of both the security clearance and the position.

EMPLOYMENT:

Short sale:

  • Does not present any challenge to present or future employment.

Foreclosure:

  • May have negative impact of employees in sensitive positions.
  • Is often detrimental in any future hiring process.