Short Sale Credit Reporting

What’s the difference between the upside-down homeowner that works tirelessly for months or years to work out a short sale, and the one that just walks away and lets it be foreclosed on? According to computer glitches at some of the credit bureaus: nothing! Former homeowners that went through short sales in years past and cooperated with banks to recoup as much as possible for their negative equity homes, have recently found that those short sales were errantly reported on their credit profiles as foreclosures, which has now sunk their attempts to buy again.

While there have certainly been many homeowners that bought into negative-amortized loans and interest-only payments, gambling on never-ending double digit appreciation, there have also been plenty that found themselves with no equity after all the irresponsible market shenanigans, and when forced to sell had nowhere to turn. But instead of moving out by night and changing their numbers, they worked with their banks and went through the lengthy and grueling short sale process to take responsibility and actively participate in a sale of their property for as much as the market would bear.

Many were assured that their actions would be rewarded with lighter negative impacts on their credit scores and shorter time frames before they could buy again. But when some of those short sales were miscoded by credit company computer systems, it resulted in reported foreclosures that now prohibit many from buying.

This piece by Lindsay Wise (McClatchy Washington Bureau) highlights three past homeowners’ experiences that have left them searching for answers, and justice.

“Homeowners who used short sales find their credit sunk by computer glitch”

Do you think the credit agencies should be allowed to get away with these errors? They do after all control a significant portion of our financial, economic, and even employment futures… don’t they have a responsibility to get it right?! It’s not like we ever signed off to allow them to profile us anyway – and everywhere else profiling is a crime. But I digress.

The take-away is that all homeowners that complete a short sale MUST follow up with their credit reporting agencies to ensure proper reporting of the short sale so that they avoid these problems and can eventually move on to own homes again. Once you’ve been through all the lender hoops to even get the short sale approved, you owe it to yourself and your family to be sure this is completed accurately as well.