Options to Foreclosure

Your have several options to foreclosure.  While some options to foreclosure allow you to keep your home, others do not.  When faced with missed mortgage payments it is important to react quickly, review your options to foreclosure and make the decision that is best for you and your family.  Many times receive phone calls from homeowners who have an auction date a few weeks away.  While it is not impossible to stop an auction with the date a week or two out it makes it much harder.  In Massachusetts, the foreclosure process is a long one and you have at least 6 months of knowing there is a problem paying your mortgage before a foreclosure auction will occur.  REACT IMMEDIATELY when you know there is a problem.   The foreclosure process varies from state to state so if you are in another state do not assume you have plenty of time.

What are my options to foreclosure?

Options to foreclosure the will allow you to keep your home:

  1. Loan forbearance-  Loan forbearance is where your loan payments are put on hold or partially payments are made for a small period of time.  This is reserved for homeowners who can document their financial situation is temporary and can be put back on track in a short period of time.  While this is an option,  I do not know of an incident where this has been done.
  2. Loan Modification- A loan modification is where the mortgage holder agrees to lower the mortgage payment though interest rate deduction, lengthen the loan term, changing the loan product or all three.  The bank will never forgive the loan balance you will always owe the same amount of money.  You must qualify for a loan modification much like you do for a loan.  I have a great article on loan modifications and is worth a quick read.
  3. Pay the Delinquent Balance-  Getting your mortgage caught up and make timely payments is definitely an alternative for avoiding foreclosure.  While for many this is not an otion it can certainly be the easiest route to go.

Options to foreclosure where you will give up your home but lighten the impact of a foreclosure:

  1. Short Sale- A transaction where you negotiate the short pay off of a mortgage with lien holders allowing you to sell your home for less money than what is owed on the property.  This is probably one of the more common options to foreclosure.
  2. Deed-in-lieu– A transaction which a home owner signs the deed over to the bank.  Many banks will not consider this as an option as they still have to take possession of the property.  If they do consider a deed-in-lieu they usually want you to try and short sale your home for a period of 90-120 days.  A deed-in-lieu can nly be considered if their is one lien holder.

The bankruptcy option to foreclosure:

Bankruptcy is in a category of its own.  There are case where you do a foreclosure and end up doing a short sale or deed-in-lieu of foreclosure.  Then, there are times where you use a bankruptcy to strip off a second mortgage to lessen your mortgage amount or reduce the amount of consumer debt so you can now afford your mortgage.  Bankruptcy is complicated and should not be automatically considered until you have exhausted your options or you know you will have to do a bankruptcy irregardless of a shorts, sale, loan modification or foreclosure.

The options to foreclosure provide you with a way to avoid foreclosure and the far reaching effects of foreclosure.  While the options may not be totally painless they are better than having a foreclosure on your record.  Any good short sale agent will have the experience to talk about your options with you and provide you with resources to pursue any of the options to foreclosure.

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Kevin Vitali of EXIT Group One Real Estate has provided you with the article, Options to Foreclosure.  Kevin has successfully provided information to allow people to keep their home as well as help many underwater homeowners do a short sale.  For any questions regarding avoiding foreclosure or Massachusetts Short Sales call Kevin at 978-360-0422