One more reason that a short sale is better than foreclosure … The government-owned mortgage giant Fannie Mae issued the following warning:
“Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.”
Prior to this policy change, a foreclosure would render the mortgagor ineligible for 5 years. However, if you complete a short sale instead, the prohibition is a mere 2 years – Approximately the length of time it takes the average consumer to get back on their feet again.