Can a lender file a foreclosure on your credit repor...
Submitted by jarsrove
from CA
- 03/17/2009 - 11:20am
Can a lender file a foreclosure on your credit report after 120 days past due and leave it there even after approving a short sale? B of A says it stays no matter what transpires and that's it unless a clerical error was made. Will that foreclosure listing effect me just as much as a true foreclosure where I walk away? There seems to be a differing opinions about this. People in real estate are sure it can be removed and people in the banking or mortgage industry are positive it remains as by their rules120 past due especially with a Notice of Default filed means you were in foreclosure regardless of how it ends; approved short sale OR foreclosure sale by the lender.
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Couple of things:
1. A notice of default is public record and is never removed from the county recorders index.
2. When negotiating a short sale you can negotiate what they will show on the credit report, as well as what if any recourse the lender may have after the sale.
3. Despite 2 it is unlikely they will re-write history and show that you always paid on time or remove the fact a foreclosure was filed completely.
4. It is my understanding that Fannie and Freddie will allow you to finance another home with them after just 2 years if you completed a short sale, where as they require a wait of 5 years if you let the foreclosure finish.
5. Regardless of what your credit report says, the fact that you made the effort to complete a short sale will be clearly better to future lenders than having just walked away.
I'm personally a fan of short sales and just wish lenders were a bit easier to work with, especially since they clearly lose less with a short sale than with a foreclosure.
Sean -
Current Fannie Mae requirements do allow a homeowner who qualifies purchase a home in 2 year vs 5 years for a foreclosure.
There are also additional restrictions on a homeowner who gets foreclosed on vs short sale - the additional restrictions are:
- buyer must put 10% down and have a 680 credit score
- buyer can NOT buy a second home or investment property
- borrower can NOT pull cash-out on a loan.
These additional requirement will be in effect for up to 7 years based on current Fannie Guidelines.
If someone would like the Fannie Memo, send me an e-mail and I will forward a PDF copy to you.
Bob
Certified Distressed Property Expert (CDPE)
bob@inspiragroup.com
I carried the note on a home that I recently had to foreclose on. When can I enter the yard? Can I offer it for sale or rent?
P.S. I am from Michigan and also the home is still occupied as I believe they are squatting in the home as long as the redemption periods lasts. They have no intention of redeeming the mortgage. The Sherrifs sale already took place and I purchased the property back per se~.
I just finished short selling my house. The NOD up until the Notice of Trustee Sale were all filed with the County. However, a rescission of the Notice of Default was ultimately filed after the short sale was completed and the deed was paid.
My credit report says "Paid for Settled Amount. Foreclosure"
I called the bank (Aurora) and the phone clerk told me "Well you sold the house but it was in foreclosure"
That is technically correct, however, the rescission of the notice of default which started the foreclosure, technically rescinds the entire foreclosure, so I am going to write some letters and see what I can do.
By the way, my credit score is already back up to 648 and I sold a couple of months ago, so I guess I don't really care that much. It is such a relief to get that overpriced place unloaded off my hands.
The fact that they rescinded the NOD is fascinating. Would love to know where your credit score was before the foreclosure - would be a great real world example for people to see the hit a short sale actually has on ones credit. Thanks for sharing the info above!!!
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