The question comes up for foreclosure attorneys all the time, should a client accept deed in lieu, short sale or just let it go to foreclosure?
There’s never a 100% good answer, but there are many clues. Most important to understand are the fact that working with the plaintiff, through short sale, deed in lieu or modification are always preferable to not cooperating and letting it go to foreclosure….for reasons beyond the credit impact. But the critical question is how this impacts a borrower’s credit.
This is not true — turns out there’s no significant difference in FICO score impact among foreclosures, short sales or deeds in lieu of foreclosure, said Bradley Graham, senior director of scores product management at FICO, which is the trademark credit scoring model created by Fair Isaac Corp. It’s the most widely used scoring system in the country.
“All of those events represent a loan default and as such are highly predictive of future credit risk,” Graham wrote in an e-mail.
If you apply for a loan in the future, certain lenders may look more favorably at a short sale than at a foreclosure, but the credit scoring system sees all these defaults as equally bad. Graham said that based on the analysis of the information that lenders share with credit bureaus about those forms of mortgage default, they have about the same weight when determining future risk.
Full article HERE
