Short Sale vs. Deed in Lieu

My atty is negotiating with my bank’s atty regarding an investment condo I own that is in litigation. The lender’s atty said they will entertain either a DIL or short sale but that the DIL carries no 1099C.  I believe bank’s attorney is incorrect.

My accountant tells me not to worry about the 1099C as it is business but I need to know if I took the DIL and they mark it as above, will my credit be tarnished. There are no late payments as Im up to date (performing loan). I  am under the impression that a DIL, no matter how it is reported is still a foreclosure as such and the credit companies have specific codes that will be inserted in my report no matter what how the DIL is reported. Am I right?

The lenders atty said they would probably put Disputed but Resolved.

On the other hand, a short sale will give me a 1099C that can be dealt with & probably a hit on my credit report for shorter time period.

Please take into consideration that I’m UP TO DATE ON EVERYTHING.

Steve

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Hello Steve,

There is a 1099 on both a short sale and a deed-in-lieu.  It’s a 1099-C on a short sale and a 1099-A on a deed-in-lieu.  A deed-in-lieu is treated the same as a foreclosure by Fannie Mae underwriting which would require a five-year wait to obtain another mortgage while a short sale is only a two-year wait.

Thanks for the questions and hope this helps.

Paul