On September 19, 2010, Pres. Bill Clinton made several remarks about the current economic crises on NBC’s “Meet the Press.” In particular, the President stated that “over two million of our fellow citizens are living in homes that are worth less than their mortgages, so if they move, their credit is ruined for life.”
Clip of this interview may be available at www.msnbc.com, last linked at: http://www.msnbc.msn.com/id/3032608/#39256267
Perhaps President Clinton was exaggerating the impact of a foreclosure or short sale on a person’s credit report to make his point, that more people need more freedom to move to places where their job skills are needed by employers. The fact is, a foreclosure and other negative credit entries cannot be reported for the rest of your life, they must be removed after seven years. (See 15 U.S.C. § 1681c(a).)
The relevant exemption in the Fair Credit Reporting Act (FCRA) to the seven-year limit is for credit transactions where the principal amount exceeds $150,000 and jobs applications where the annual salary is expected to be $75,000 or more. (See 15 U.S.C. § 1681c(b).)
The other exception to the seven-year rule may also apply to unpaid judgments, such as on debt collection lawsuits and credit card lawsuits that have resulted in a judgment that remains unpaid. Such a judgment could remain enforceable in California for up to 20 years, if timely renewed. While there is no definitive interpretation of this point, a credit reporting agency might report a California unpaid judgment for up to 20 years, which is still not “forever.”
Under California law, our anti-deficiency statutes prevent a lender to obtain a deficiency judgment on many secured, real estate loans. The facts need to be evaluated individually to ensure that the anti-deficiency statutes apply, but please review sections 580a thru 580d of the California Code of Civil Procedure, or contact me or a real estate attorney for an evaluation. With our anti-deficiency statutes, more people should properly evaluate their situation to learn if the are able to leave their homes that are upside-down to seek employment.