Alternatives To Avoid Foreclosure

Thursday, September 6th, 2012

There are many options available to local residents facing foreclosure. The type of mortgage loan you have may determine what types of alternatives you may be eligible to pursue in order to avoid foreclosure. Keep in mind that it is important to contact your lender to discuss which alternatives you are eligible for, and which one is best for your situation.

Bring Your Payments Current (reinstatement)

Homeowners can reinstate a mortgage up to the day before a final foreclosure sale, and it doesn’t require lender approval. You may also pay your lender the full amount due, including all back payments, fines and fees.

Rent The Property

Renting the property is an option for homeowners who have mortgage payments low enough that a rental payment allows the loan to be paid. However, keep in mind that with rental properties, many expenses, taxes, insurance and landlord responsibilities are a factor, and rental income may not cover the full cost of ownership and maintenance.

Loan Modification

If you can make payments on your loan, but don’t have enough money to bring your account current, your lender may change the terms of your original loan to absorb your delinquent payments and make the payments more affordable. Your loan could also be permanently changed by adding the missed payments to the back end of the existing loan balance, lower the interest rate, make an adjustable rate fixed, or extend the number of years you have to repay your loan.

Refinance

If you have enough equity in your home and your credit is still in good standing, you may be able to refinance an unaffordable loan and achieve lower payments.

Payment Plan (forbearance)

A forbearance agreement means you pay only a portion of your regular payment or no payment at all for a specific period of time based on your current financial situation. This temporary solution provides time to save money, pay off other bills, find employment or additional employment, or recover from injury or illness. At the end of the forbearance period, you begin making regular payments as well as an additional amount to pay off the past due amount.

Bankruptcy

In some situations and in some states bankruptcy stalls the foreclosure process and may allow you to live in your home and repay your lender under different terms.

HUD Partial Claim

If your loan is an FHA insured loan, your lender may be able to obtain a one time payment from the FHA Insurance Fund to bring your mortgage loan current with payments.