I recently talked with Money Magazine about short sales versus foreclosures. Short sales are reported to the credit bureaus as either settlements or charge offs. This is accurate reporting in either case because the lender has, in fact, settled for less than the full loan amount and considers the loan to be paid in full OR has charged off the deficiency balance.
FICO will confirm the same for you if you’d like to ask them via their forums. Here’s a quote from their site moderator:
As of now there is no way to report a loan as being “sold short” or any other variation of that term.
John Ulzheimer– Credit scoring and credit reporting expert, author and President of
Consumer Education for Credit.com. Formerly with Equifax and Fair
Isaac, John shares his unique insight of the inner workings of credit
scoring models and the credit reporting industry on CreditBloggers.com.
Credit.com offers straightforward tips and advice to help you make smarter financial decisions. Visit Credit.com to sign up for your FREE Credit Report Card and find out where you stand today!
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Heard this morning on the news that the Obama administration has (yet another) plan to help homeowners by making it easier to sell short instead of letting a home go into/through foreclosure. But the reporter made no mention of whether anyone’s addressed the issue of short sales damaging one’s credit score as badly as foreclosures.
To my mind, I don’t care how much easier a short sale is to complete, it’s still more work than just moving out and mailing back the keys.
Have y’all at Credit Bloggers heard anything about changing the way the FICO folks score short sales?
Spoke with my financial adviser in regards to short selling and was told to “walk away” from my home where the principal balnce is 598K and the comps in the area are selling for the mid 300K.
He spoke about a Amnesty law being implemented similar to the 1980s where credit history may be forgiven or at least balnced.
Any information regarding these laws?