Options when facing Foreclosure:

1. Do Nothing: If a homeowner does nothing, they most likely will lose their home at a foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information.
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 a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, you will want to make sure there is equity in the home.
3. Reinstatement: Completely 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 problems that caused the late payment.
5. Forbearance: Lender may be able to arrange a repayment plan based on the homeowners financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.
6. Partial Claims: A loan from the lender for a 2nd loan to include back payments, costs and fees.
7. Deed in Lieu of Foreclosure: Give the property back to the bank instead of the bank foreclosing. Banks generaly require the home to be well maintained, all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened.
8. Bankruptcy: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 in 3-5 years.

   - Chapter 11 (Business Reorganization) A business debt solution

9. Sale/Short Sale: Sale is 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 by the Real Estate Professional if what is owed is more than the properties value.

Short Sale vs. Foreclosure

Foreclosure Timeline

Advantages of a Short Sale

• Avoid foreclosure on your credit
• Avoid potential bankruptcy
• Avoid being evicted from your home due to foreclosure
• Less potential tax liabilities
• Easier to clean up your credit and reduce the time it takes to re-qualify for future homeownership
• Get out from underneath a depreciating asset
• Lenders generally pay for normal and customary closing costs & real estate commissions
• Can potentially avoid liability for their mortgage debt and negotiating on your own terms the delinquency judgment if it applies.
• In most cases, sellers will have no out of pocket expenses unless requested by the Mortgage Servicer (s).
• Homeowner education & clear understanding to make the best decision for your situation
• You do not have to be late on your payments to get a short sale approved.