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My OPTIONS

Alternatives to Foreclosure

You may be facing foreclosure...so what are your options? Try to look at the situation more from a financial standpoint rather than an emotional standpoint. This way you can more successfully analyze which option might best suit your needs and desires to move you towards resolving your financial difficulty .One very important thing to remember: Time is of the essence. Take time to think through your situation and make a decision. Then, take action right away so you have enough time to complete the solution you choose.

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. Not the best option.
   
   
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 should be equity in the home.
   
   
3. Reinstatement-Paying the entire default amount plus interest, attorney fee, 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 payment.
   
   
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 from the lender to show that caused the late payment.
   
   
6. Partial Claim-A loan from the lender for 2nd loan to include back payments, costs and fees.
   
   
7. ÂDeed in Lieu of Foreclosure-Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payment 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
   1. --Chapter7 (liquidation) to completely settle personal debt.
   2. --Chapter13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
   3. --Chapter11 (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 the lender by your Real Estate Professional if what is owed is MORE than the property’s value.
   
   
10. Apply for monthly payment assistance through one of the government programs.
    
    
11. Consult an Attorney and/ or CPA.

5 Reasons to Avoid Foreclosure

1. The homeowner will always have to disclose they have had a foreclosure on any
   mortgage application.
   
   
2. Credit scores could be lowered by 200-300 points affecting the ability to get a car,
   apartment, credit cards, etc.
   
   
3. A foreclosure is the one credit report item that is almost impossible to
   be “repaired”.
   
   
4. Military and government security clearance could be at risk with foreclosure.
   
   
5. Many employers run credit checks on prospective employees. Foreclosure is one
   of the top items that will put a potential new hire in jeopardy.