How does Credit Report Look after a Short Sale?

I had a client ask me how his credit report would differ if the bank accepted a short sale as payment in full or if they went after a deficiency judgement. If they go after a deficiency judgement does the balance just show as a outstanding loan?

Has anyone come across this?

Thanks for the help!

Tags: credit, deficiency, judgement, report, sale, short

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Permalink Reply by Wendy Rulnick on January 1, 2010 at 11:05am

Hi James - Payment in full I believe would have no effect on credits from reports I've received. Payment for "less than full amount", would be a derogatory event from my research. A "judgment" that is recorded in public records would be a derogatory event. One cannot know the exact scoring change, as the rest of the person's credit info is taken into account- number of outstanding balances, payment history, amount of credit versus available credit, etc.

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Permalink Reply by James Lockard on January 1, 2010 at 11:10am

Thanks Wendy!

To follow up on your comment regarding a "judgement" recorded in public records, do you have any idea how long this stays on your credit report as opposed to a foreclosure?

Thanks again!

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Permalink Reply by Wendy Rulnick on January 1, 2010 at 11:27am

Hi James - I think it depends on each state's law, don't know. Perhaps others will jump in here... maybe Richard Zaretsky, who is our attorney member.

James Lockard said:

Thanks Wendy!

To follow up on your comment regarding a "judgement" recorded in public records, do you have any idea how long this stays on your credit report as opposed to a foreclosure?

Thanks again!

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Permalink Reply by Dominique Van Ryckeghem on January 2, 2010 at 9:09pm

James:

You definitely want to check the credit report 30 to 60 days after COE to make sure that reporting is as it should be per the approval letter. The Fair Credit Reporting Act (FRCA) allows you to dispute those accounts and have those erroneous items removed from credit.
I am in the process of doing this for a client.
Just as an FYI, my clients score went down from 780 to 600 after the short sale.

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Permalink Reply by Maria Evans on January 26, 2010 at 10:56pm

I read last weekend an excellent paper by Brent T White: Underwater and not walking away: shame, fear and social management of the housing crises. You can check on:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467
I believe that there is a growing "walk away" moviment and we will see more and more people walking away from their homes. Did you see today on Nightly News? The paper has to do with the whole credit score thing.... very interesting.

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Permalink Reply by Emily S. Knell on January 29, 2010 at 5:20pm

I recently closed a short sale with Wells Fargo Home Mortgage 1st & Wells Fargo Home Equity Solutions 2nd where the owners had no hardship, were never late on payments. They had started with scores in the mid 700's, the wife's went down to 620, we did a rapid rescore & they're both in around 720 right now.

They're now approved for an FHA loan w/ 3.5% down & we're house hunting!

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Permalink Reply by Lillie Dominguez on January 17, 2012 at 4:06pm

Emily,

Thank you for your info. Were the loans refinanced? Did they have to contribute to either the 1st or 2nd-Heloc.? Was there a deficiency judgement? What state of this in?

We have refinanced with a 1st & 2nd and are way under water.

Thank you,

Lillie