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Andrew Wilson

Fannie-Freddie short-sale program may hurt sellers' credit scores

WASHINGTON — With generous new guidelines from Fannie Mae and Freddie Mac likely to stimulate large numbers of short sales by underwater homeowners, what effect will the sales have on the sellers' credit scores?

It's a crucial question, because short sales typically cause FICO scores to plummet, sometimes 150 points or more. This, in turn, complicates sellers' credit capabilities for years and makes additional borrowing — whether for auto loans, credit cards or new mortgages — tougher and more expensive.

The issue arises now because Fannie Mae and Freddie Mac — the dominant sources of home loan funds — recently outlined plans to approve short sales for underwater borrowers who...

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