The damage comes from them reported "settled for less than full balance", as opposed to "paid as agreed". You'll face a waiting period (3 years I believe for FHA) to get another mortgage, because short sales are treated the same as foreclosure for mortgage underwriting. And with a short sale in your past you'll be "thoroughly" studied by underwriting. So if you can swing remaining current that will help you if you want to get underwritten for another mortgage any time soon.
