Short sales show up on credit reports as foreclosure, sellers unable to get back in housing market

It is critical that your Real Estate Agent know what to look for in your short sale approval letter!  Make sure you work with an experienced short sale agent!  Call me today with questions! Laura Key 310.866.8422

More and more short sales are turning up as foreclosures on credit reports. The issue caught the attention of Senator Bill Nelson who this week asked for a federal investigation into why the mortgage industry does not have a separate credit reporting code for short sales.

Like some of his Trinity neighbors, George Albright unloaded his underwater two-story thru a short sale.  A short sale damages credit versus a foreclosure that slashes consumer scores.

It's been more than two years since Albright sold his home, and now's he ready to buy again, but can't.  It’s showing up as a foreclosure on his credit.

Veteran mortgage broker Pam Marron found it's a scenario repeating itself over and over again.  Short sellers discover they can't get back into the housing market because their credit report shows a foreclosure.

Why? The banks and credit bureaus have no special code to report a short sale, according to Marron, who recently traveled to D.C. to educate lawmakers and lobby groups like the Consumer Protection Bureau to do something about the glitch that could affect many.

Experian says the problem is not theirs. In an email, a spokesperson explained.  "The short sales and foreclosures are being coded correctly on Experian’s credit reports.  Where we have found the discrepancies occurring is in the underwriting process."

Short term, Marron says, short sellers must demand a letter from their lender that states that the property closed is a short sale and any marking of a foreclosure should be deleted.

Source: www.ABCActionNews.com By: Jackie Callaway

25% of Consumers Have Errors on Credit Report

Consumers need to be extra vigilant about checking for any errors on their credit reports, according to the Federal Trade Commission. 

One in four Americans report they’ve found an error on their credit report, according to a study conducted by the FTC, which analyzed 1,001 consumers’ credit reports from the three major agencies, Equifax, Experian, and TransUnion. Researchers helped the consumers spot potential errors on their reports. 

Five percent of the consumers found such large errors on their report that they could have gotten stuck paying more for mortgages or other financial products, if they hadn’t taken steps to correct it before applying, according to the study. 

Twenty percent of the credit reports studied that were found to have errors in it were ultimately corrected after the consumer took steps to dispute it, which resulted in about 10 percent of consumers receiving a higher credit score, according to the study. 

Consumers are entitled to receive a free copy of their credit report each year from the three reporting agencies. 

Source: “Study: 1 In 4 Consumers Had Error In Credit Report,” The Associated Press (Feb. 11, 2013)

Keeping a close look at your credit can make or break the decision to purchase a home! Call Laura Key for more info! 310.866.8422 or Laura.A.Key@gmail.com