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Issue	Foreclosure	Successful Short Sale
Future Fannie Mae Loan - Primary Residence	A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of 5 years.	A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage after only 2 years.
Future Fannie Mae Loan - Non-Primary	An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae-backed investment mortgage for a period of 7 years.	An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed investment mortgage after only 2 years.
Future Loan with any Mortgage Company	On any future application, a prospective borrower will have to answer “YES” to question C in Section VIII of the standard 1003 form that asks “Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” This will affect future rates.	There is no similar declaration or question regarding a short sale.
Credit Score	Score may be lowered anywhere from 250 to more than 300 points. Typically will affect a credit score for over 3 years.	Only late payments on mortgage will show, and after sale, mortgage is normally reported as “paid as agreed”, “paid as negotiated’, or “settled”. This can lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months.
Credit History	Foreclosure will remain as a public record permanently, and on a person’s credit history for 10 years or more.	A short sale is not reported on a credit history. There is no specific reporting item for “short sale”. The loan is typically reported, “paid in full, settled”.
Security Clearance	Foreclosure is the most challenging issue against a security clearance outside a serious misdemeanor or felony conviction. If a client has a foreclosure and is a police officer, in the military, in the CIA, security, or any other position that requires a security clearance, in almost all cases clearance will be revoked and the position will be terminated.	On its own, a short sale does not challenge most security clearances.
Current Employment	Employers have the right and are actively checking the credit of all employees who are in sensitive positions. In some cases, a foreclosure is reason for immediate reassignment or termination.	A short sale is not reported on a credit report and is therefore not a challenge to employment.
Future Employment	Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.	A short sale is not reported on a credit report and is therefore not a challenge to future employment.
Deficiency Judgment	In Arizona foreclosures, non-foreclosing lien-holders (lien-holders in second or third position) have the right to pursue a deficiency judgment.	In many successful short sales, the lender gives up the right to pursue a deficiency judgment against the homeowner. Your real estate attorney’s review of your short sale approval letter is essential in this matter.
Deficiency Judgment (amount)	In a foreclosure, the home will have to go through an REO process if it does not sell at auction. Due to legal and property maintenance expenses, this will likely result in a greater deficiency.	In a properly managed short sale, the home is sold at a price that should be close to market value, and in almost all cases will result in a lower deficiency than an REO sale.