What Will Happen If The Bank Forecloses

Did You Know …?

• A homeowner who goes through foreclosure is ineligible for a Fannie Mae backed loan for 5 years and an investor owner is ineligible for 7 years.
• Future mortgage loans and interest rates will be affected because the foreclosed homeowner must answer “Yes” to the Form 1003 Uniform Residential Loan Application question “Have you had property foreclosed upon you or given title or deed in lieu thereof in the last 7 years?”
• A foreclosure affects credit scores downward by 250 to 300 points, typical for over 3 years.
• Foreclosure stays on credit history for 10 years or more.
• Current and future employment may be affected as many employers now require credit checks, particularly for employees in financial or sensitive positions.
• Outside of conviction of a crime, foreclosure is the most serious issue affecting a security clearance. For those employed by a police force, the military, a security company, the CIA or other governmental agency, a foreclosure could mean immediate loss of the security clearance and the position.
• A bank may seek a deficiency judgment against the borrower. The bank will threaten you with being sued again and losing your other home, having your other assets repossessed, and maybe even having your bank or retirement accounts stolen or wages garnished. In most cases, the bank will not pursue a deficiency judgment unless they believe you have the assets to take.

For home sellers who owe the lender more than their home is worth, it's not as bleak as it might sound. Negotiating a short sale with the lender could be the solution.

This means the seller or the seller's agent sells the home to a buyer at market, or slightly below market value, and the lender agrees to accept the proceeds as payment in full on the mortgage even though the sales price is less than the existing encumbrances.

The downside is lenders are not required to negotiate discounted payoffs, and there is no guarantee your lender will let you do a short sale. However, there are options available to you to improve your odds of a successful short sale.