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>>DALE: Hello, it's Dale Snyder with The Snyder Group at Keller Williams Realty here in Las
Vegas. Today's topic of discussion is going to be short sales, notice of defaults, and
foreclosures, and how it impacts your credit and your ability to repurchase.
Today, we have Erik Wirtner with us, with Van *** Mortgage. He's an expert on this
exact topic that's why we brought him in today.
Thanks for coming in today Erik. I appreciate it.
>>ERIK: Thanks Dale. I appreciate it. Thanks for having me this morning.
Well, when we talk about credit reports and we talk about the impact of the short sale,
or foreclosure, or notice of default, it's a common question I get. Traditionally, it
starts out with a client coming to a real estate agent and stating, you know, "Dale,
I think maybe I'd like to short sale my home."
And at that point, they may or may not be delinquent. So let's start with the case where
there is no delinquency. Now, you know the normal process that you go through in order
to get the short sale move through. Sometimes it requires a few delinquencies and less delinquencies
are better than more, obviously, for future purchasing power.
So you always want to keep those delinquencies at a minimum. Let's say they stayed current
the entire time up to the point of short sale, and short sold it without any delinquencies
at all. The account would be reported on the credit report as settled for less than full
balance.
So basically stating that, you know, not everything was paid but a big portion of it was. It won't
state whether or not there's a deficiency judgment or that there's a release of deficiency
judgement. So it's important that they hang on to their paperwork at the time of the short
sale for that or after the deficiency judgement was released.
So then we move into, you know, a client that comes to you already late. And the client
that comes to you, you know, that's got 30, 60, 90 days down. They better start leaning
more towards the NOD [Notice of Default]. It is important for a client who is short
selling to maybe still trickle in a payment or two while they're going through the process
to stay out of the Notice of Default Foreclosure section.
Because once that NOD is filed it will have much greater implications on the credit than
it would if you just had a series of delinquencies with no NOD filed.
An NOD means a lender has started the foreclosure process. You are greater than a 120 days down,
and they're exercising a legal option to take the property back, sold at auction, and then
recoup whatever they can from the collateral.
So in that situation, like I said, it's best to keep out of the NOD foreclosure because
it will hamper you further because the guidelines are much more strict if you have a Notice
of Default or foreclosure on your credit report.
And that's basically what will happen. Now, the score variance and drops are going to
be dependent upon the client and are going to go from file to file how much credit history
they had previously. Do they have other mortgages reported in the last 7 years. So it's really
tough to say the score impact but from a purchasing standpoint, which I'm probably going to get
into another video - it's best to keep those things at a minimum.
And a short sale itself isn't going to negatively impact the report as long as you haven't been
late.
>>DALE: Okay, I've got a question. I know clients are still going to ask me this. What
do you think on average they're going to see for a credit hit, just a ballpark number I
know this is kind of a vague question to ask.
Somebody that stays current and gets the short sale processed. Somebody that may only missed
only a few payments and the NOD isn't filed. And somebody that's severely delinquent and
has a Notice of Default. Can you give me just a ballpark on those?
>>ERIK: Yup, I absolutely can. If you can stay current the entire time through the short
sale process and at the time the home was actually sold still you were current on the
mortgage - having a trendline labeled "settled in less full balance" is not going to negatively
impact you. What will is the payment history leading up to it. So, if the payment history
leading up to it, is, you know, what we say "dirty" meaning has some derogatories on it.
The series that have the derogatories, whether it's a 30 days, 60 days, or 90 days, or 120
are going to impact the score, you know, more significantly. Say from a 30-day late to a
120-day late you got 4 months behind on it.
You're looking at probably about 70 point swing on your credit report on average, okay.
>>DALE: Okay, sorry I was thinking about a sheep or something jumping over the moon but
- I don't know why I've said that bear with me here but what I'm getting at here is 30
days, 60 days, 90 days, are you saying 70 points or so for each one of those?
>>ERIK: No, no, from beginning to end. From 30 to 120 days.
>>DALE: Okay, okay. I got it.
>>ERIK: So if you had a 720 by the time you got on the 120-day late on there, a pretty
decent report sitting around at many of the trend lines that have strengthened the report
you're going to looking at somewhere along the lines of probably a 650 score. And as
that stays delinquent on the report prior to the short sale, your score is going to
slide further and further.
So, one, keep the lates to a minimum, you know. Two, make sure that you execute the
short sale as quickly as possible and obviously that's not up to the seller or the agent that's
up to the investor or the bank. Three, try to maybe trickle some payments and to keep
it out of the Notice of Default category.
>>DALE: Okay, that makes sense.
Okay, and then what about foreclosure? Can you briefly just touch on that?
>>ERIK: Well, foreclosures are the cardinal sin in lending. You know, when a client has
a previous foreclosure on there. It shows that there was some sort of circumstance within
or outside of their control, of which they had to relinquish the home.
You know, the place in which they live back to the lender. And the lender, essentially,
is going to have lost a serious amount of money on it.
In a foreclosure, that can be very damning to the credit report and you know you could
be looking at losing a 150 to 200 points or so, when a foreclosure has been labeled and
it actually goes through process.
How it get's labeled on the credit report, it will state, you know, "home foreclosure,
repo" and then traditionally it will be balance will be zeroed out. Meaning, they basically
said that account is settled and sold at auction.
>>DALE: Okay, got it. Okay, alright, well thank you we appreciate the info I hope this
was helpful. Once again it's Dale Snyder with The Snyder Group here at Keller Williams Realty.
We have Erik [Wirtner] with Van *** Mortgage. You can find him on our website at DaleSnyder.net
under the info tab, under vendors.
Have a fantastic day.