9 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.
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 a normally higher interest rate and there may be a prepayment penalty because of the recent default.  With this option, you will want to make sure there is equity in the home or otherwise have the capacity to pay any deficiency amount through your own funds or another loan.
3.    Reinstatement:  Completely paying the entire default amount plus interest, attorney fees, 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 problems that caused the late payment and have the income capacity to make future payments.
5.    Forbearance:  Lender may be able to arrange a repayment plan based on he homeowners financial situation.  The lender may even be able to provdie a temporary payment reduction or suspension of payments. Information will be required form the lender to show that you are able to meet the new payment plan requirements.
6.    Partial Claims:  A loan from the lender for a 2nd loan to include back payments, costs and fees.
7.    Deed in Lieu of Foreclosure:  Give the property back to the bank instead of the bank foreclosing.  Many lenders will actually provide assistance for moving expenses if you agree to maintain the home and find alternative housing in a timely manner.
8.    B ankruptcy:  This option can liquidate debt and/or allow more time.
-    Chapter 7 (Liquidation)  To completely settle personal debt
-    Chapter 13 (Wage Earner Plan)  Payments are made toward a plan to pay off debts in 3-5 years
-    Chapter 11 (Business Reorganization)  A business debt solution
9.    Sale/Short Sale:  Sale is 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 h home sale.  In this case the homeowner will get cash from the sale or is willing to provide enough funds to complete the sale.  On the other hand, a Short Sale (also known as a pre-foreclosure sale) can be negotiated with your lender.

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