Credit Effect

Foreclosure:

The foreclosure in Illinois is a Judicial Foreclosure.  This means that the foreclosure must be approved by a Judge.  This means that if a person’s home is foreclosed on, that they will actually have a judgment against them on their credit report.

A foreclosure will remain on a credit report in the public records section for 10 years.  The other issue with the foreclosure is that on loan application (for purchasing a new home), under Declarations, Section VIII it specifically asks a borrower if they have had a property foreclosed upon in the last 7 years.

The other issue with a foreclosure in Illinois is the Deficiency Judgment.  The lender has the right to ask the court for a money judgment against the previous home owner personally.

The last problem is bankruptcy.  The bottom line is that if previous home owner had the money to pay for the home, they would have.

In the end:
The home owner will most likely have 3 judgments (including bankruptcy) and get docked at least 300 points on his or her credit report.

 

Short Sale:

The short sale is very different.  The nicest part of a short sale, is that it is NOT a judgment.  It is an agreed apon arangement between you and the mortgage holder.  The other nice feature is that banks do not generally ask for any of the losses back from you the previous home owner.

In the end:
If the home owner does go through a Short Sale and the bank does not request a money judgment, the homeowner’s credit will be affected by as little as 100 points.

Other good news:
Fannie Mae now only requires 24 months’ seasoning for a new loan.