Foreclosure Remedies
If your home is in danger of being foreclosed, you have a number of remedies available to you to avoid losing your home. The foreclosure process can take some time, but by taking careful, but aggressive steps, you may be able to avoid legal action. If you fall behind on your mortgage payments, communicate directly and frequently with your lender.
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Mortgage Modification
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Contact your lender to see if it is agreeable to modifying the terms of your mortgage. That modification may involve adding payments to the end of your mortgage, effectively extending the loan's terms. It can also include a reduction in your interest rate and it may include partial forgiveness of the amount of money you owe. Visit the federal government's website about mortgage modification for more information.
Reinstatement
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Get your loan reinstated. If your financial picture has changed for the better since the foreclosure process began, you may able to get your loan reinstated. Generally, this involves catching up on past due payments, paying penalties and related fees and covering legal expenses. You may have recently gotten a new job, come into some money or decided to tap a retirement fund or an insurance policy. Work with your lender to bring your account up to date; banks are generally cooperative if you have the means to catch up.
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Forbearance Plan
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Ask your mortgage company for a forbearance. Under this arrangement, your mortgage provider agrees not to pursue foreclosure, provided the owner has the means to catch up on their loan. This option can be considered if you are encountering a temporary setback such as poor health or loss of employment. Legally, your mortgage company has the right to foreclose, but chooses not to purse that avenue right now.
Deed in Lieu of Foreclosure
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Give your home back to the mortgage company. If you are unable to keep your home, but you want to avoid foreclosure, your mortgage servicer may agree to accept your request for a deed in lieu of foreclosure. Under this arrangement, your banker takes back your home and cancels your remaining debt. This option offers less of a hit to your credit rating than a foreclosure, and you will lose any equity in your home, according to the Federal Trade Commission.
Short Sale
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Sell your home for less. If you have a buyer for your home who is willing to take your home for less than the outstanding balance on your mortgage, this is considered a short sale. Your mortgage servicer must agree to this arrangement, which means you need to find a qualified buyer who is willing to pay close to what you owe on your mortgage.
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