There are alternatives to foreclosure! Try to look at the situation without attaching your emotions which I realize can be difficult. But, if you view the situation from more of a business viewpoint, you will be able to more successfully analyze which option might best suit your needs and desires and move you towards resolving your financial difficulty. One very important thing to remember: Time is of the essence, so sit and take serious thought of your situation and take quick action in order to allow yourself enough time to complete the chosen process.
There are bascially nine options to foreclosure!
1. Do Nothing - If a homeowner does nothing, s/he most likely will lose his home at foreclosure auction (sheriff's sale). All future loan applications will ask if you have ever been foreclosed upon. Credit reports disclose this damaging information. Not the best option. The sheriff will most certainly show up one day and give you from 20-30 minutes to gather what belongings you can carry and vacate the premises if you have not already left the house. There is no dignity in this scenario.
2. Payoff/Refinance - Completely paying off the entire loan amount plus any default amount and fees. Usually this is accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there needs to be equity in the home.
3. Reinstatement - Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
4. Loan Modification - Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payments to begin with.
5. Forbearance - Lender may be able to arrange a repayment plan based on the homeowner's financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required by the lender to show that you are able to meet the new payment plan requirements. You must show you can recover from the hardship.
6. Partial Claim - A loan from the lender for a 2nd loan to include back payments, costs and fees. Credit must be high enough to qualify.
7. Deed in Lieu of Foreclosure - Give the property back to the bank instead of the bank foreclosing. Banks require the home be well maintained, all mortgage payment and taxes must be current. The home must be listed at fair market value for at least 90 days with no offers before this option may be exercised. Future loan applications will ask if this has ever happened.
8. Bankruptcy - This option can liquidate debt and/or allow more time. I can refer you to a qualified bankruptcy attorney.
--Chapter 7 (Liquidation) To completely settle personal debt.
--Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
--Chapter 11 (Business Reorganization) A business debt solution.
9. Sale - If the property has equity (money left over after all loans and monetary encumbrances are paid) the homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale. On the other hand, a short sale, also known as a pre-foreclosure sale, can be negotiated with your lender if what is owed is MORE than the property's value. The latter will effect your credit, but not to the degree a full foreclosure or bankruptcy will.
The key is to take action, not react! I can help. Call me. I can work with your lender. We can tackle this together!