It really comes down to how the lender will report the paid off mortgage to your credit. If they report it as "settled for less than the amount owed" then lenders will see it like a foreclosure... will want to see the Final HUD-1 on the sale of the property to find out the real story. If it simply reports as "paid" then lenders won't consider it a foreclosure. Further, if there are mortgage lates and/or a notation that says "notice of default" or "foreclosure proceedings started" then it would be treated as a foreclosure.
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