Roy Oppenheim’s, commentary was originally published on Yahoo Homes! and is being redistributed on South Florida Law Blog with their permission Yahoo! Contributor Network .
Jun 17, 2013 “Share your voice on Yahoo! websites.”
Credit code glitch impacts short sales by Roy Oppenheim, Oppenheim Law
COMMENTARY |Although the real estate market is beginning to make a comeback, the mess left behind from the economic recession will undoubtedly take much longer to clean up.
Problems associated with foreclosures and short sales continue to mount as new ones continue to pop up.
The latest example: A glitch in the credit reporting system (Metro2) that can keep those who exit their homes through a short sale from qualifying to purchase a new home for much longer than they anticipated could suppress the real estate market.
The problem lies with the software program used by the credit reporting system. We have heard from clients, and have independently confirmed through research, that the system does not have a separate code that recognizes the difference between a short sale and a foreclosure in the real estate market. The coding system is used by the three major credit-reporting organizations TransUnion, Experian and Equifax.
To understand why this is a problem, it’s important to understand the differences between a short sale and a foreclosure.
In a short sale, the bank must approve the sale of a house to a new buyer at a price that is acceptable to it, the buyer and the seller. Any unpaid loan balance that isn’t covered by the proceeds from the sale can either be partially or fully forgiven. The bank plays an active role throughout the process and can negotiate with the new buyer for a higher price and higher repayment of principal from the original borrower. Banks have begun approving short sales more than in the past because they are cheaper and are less of a problem than foreclosures.
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