Foreclosure can be an overwhelming process and can also be frightening for the homeowner. For that reason, homeowners who are facing foreclosure should be familiar with foreclosure alternatives.
There are several foreclosure alternatives homeowners can consider including:
- Special forbearance – the mortgage lender may arrange a repayment plan based on the homeowner’s financial situation and may also provide a temporary reduction or suspension of their payments. Homeowners may qualify for this option if they have recently experienced a loss of income or an increase in expenses.
- Loan modification – mortgage loan modification may help the homeowner refinance their debt or extend the term of the mortgage loan. This may help the homeowner get caught up on payments. Homeowners who have recovered from financial difficulty and are able to make their payments may qualify.
- Partial claim – the homeowner may be able to work with their lender to obtain a one-time payment from the FHA-insurance fund to bring the mortgage current. If homeowners are able to make full mortgage payments they may qualify for this option.
- Pre-foreclosure sale – this option allows the homeowner to avoid foreclosure by selling the property for an amount that is less than the amount necessary to pay off their mortgage loan.
- Deed-in-lieu of foreclosure – a deed in lieu of foreclosure allows the homeowner to return their property to the lender voluntarily. This option may be possible if no other options are available or the homeowner does not qualify for any other option.
Additional options struggling homeowners may be able to consider include a second mortgage or a reverse mortgage. Chapter 13 bankruptcy may also help stop foreclosure. Struggling homeowners should be familiar with the full range of options that may be available to them when they are facing the threat of foreclosure.