Some common alternatives to home foreclosure

On Behalf of | Sep 25, 2021 | Foreclosure |

Losing a home through mortgage foreclosure is devastating on many levels. The agony of the loss of a home and the hassle of trying to find a new place to live are bad enough by themselves, but foreclosure also damages one’s credit rating, making it harder to start over.

Fortunately, there is help available. In fact, some sources say that as many as 70-80% of all home loans that are 90 days or more overdue are eventually saved without resorting to foreclosure. Local agencies such as the Michigan Department of Health and Human Services provide emergency counseling for homeowners. Attorneys with experience in credit relief and mortgage alternatives can help with alternatives to foreclosure.

In this post, we will discuss some common methods of avoiding foreclosure.

Advance claim

The advance claim is a method best suited to homeowners who have fallen behind on their mortgage payments because of a temporary financial setback. In an advance claim, an insurer pays off the lender. In exchange, the borrower signs a promissory note to pay off the insurer over time. As the homeowner’s finances improve, they are able to keep up their mortgage payments and pay off the debt to the insurer.


For borrowers whose financial problems are more serious, forbearance can be a good choice. The borrower, preferably with the help of a skilled professional, negotiates a forbearance plan with the lender, in which they agree to make reduced payments over a specified period of time. Usually, the time is between 6-18 months. In these plans, borrowers typically agree to make up the difference by paying increased rates once the forbearance period is over.

Loan modification

Loan modification is a good option for borrowers whose financial difficulties appear to be permanent. Through negotiation, lenders can change the terms of a home loan to make it easier for the borrower to make their payments. One way they might do this is through lowering the interest rate. Another is through extending the loan period. There can also be combinations of both approaches and many others.

All these alternatives can be risky for the homeowner for a number of reasons. For those who are considering these options, it’s important to seek out good advice and representation from an attorney.