Alternatives to Foreclosure
If you are currently facing Foreclosure and have no idea to where to turn, here are a few potential options that may be worth looking into.
1) Payoff / Refinance - If you are in the position to pay off your existing loan plus any default penalties or fees. This is usually accomplished through a refinance of debt. The new debt is usually at a higher interest rate and is subject to a prepayment penalty do to the recent default. With this option there should be equity in the home.
2) Reinstatement - This is a repayment of the entire default amount including interest, attorney fees, late fees, taxes, missed payments and fees.
3) Loan Modification - This option allows the lender to work with the homeowner to try and refinance the debt or extend the terms of the loan. With a "loan modification" The borrower must qualify under specific terms and conditions, by doing so this may allow the homeowner to catch up at a more affordable level.
4) Forbearance - Based on the homeowners financial situation the lender maybe able to arrange a repayment plan. A qualified homeowner can get the lender to provide a temporary payment reduction or suspension of payments. Information will be requested from the homeowner to show that you meet the requirements for the new payment plan.
5) Partial Claim - This is a loan from the lender for a 2nd loan to include back payments, costs and fees.
6) Deed in Lieu of Foreclosure - The bank may agree to take back the property instead of foreclosure. The bank generally requires the home to be well maintained, all mortgage payments and taxes must be current.
7) Bankruptcy - Consult an attorney for more detailed information. This option can liquidate debt and / or allow more time.
-Chapter 7 (Liquidation) To completely settle personal debt.
-Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts usually in 3-5 years.
-Chapter 11 (Business Reorganization) A business debt solution.
8) Sale - If the property has equity you can do a conventional home sale without lender approval. In this situation, the homeowner will get cash from the sale. If there is more owed on the property then its valued at you can perform what is known as a short sale, also known as a pre-foreclosure sale.
9) Do Nothing - This is not your best option and should be avoided if possible. If you decide to choose this option you will most likely lose your home to foreclosure. Please check out my links provided regarding the damage a foreclosure can do to your credit and future plans of ownership.