Stopping Foreclosure Alternatives
Alternative #1: Special Forbearance.
Your lender might be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. The lender will expect you to furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Alternative #2: Mortgage Modification.
You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount. Again call your lender.
Alternative #3: Partial Claim if you have a FHA loan.
Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if:
- your loan is at least 4 months delinquent but no more than 12 months delinquent;
- you are able to begin making full mortgage payments.
When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full.The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.
Alternative #4: Pre-foreclosure sale - AKA Short Sale
This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan. This works no matter how much you owe. You may qualify if:
- Your loan is at least 2 months delinquent;
- You are able to sell your house (usually with a licensed real estate agent)
- A new appraisal (that your lender will obtain) shows that the value of your home meets their guidelines.
- The agent will work with the lender to get an offer approved for less than what is owed on the house.
- The lender then releases you from the mortgage and your credit only suffers temporarily.
- You will be asked to prove insolvency (your debts out weigh your assets)
Alternative #5: Deed-in-lieu of foreclosure.
As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house or forgive the debt, but it is not as damaging to your credit rating as a foreclosure. You can qualify if:
- You are in default and don't qualify for any of the other options;
- Your attempts at selling the house before foreclosure were unsuccessful; and
- You don't have another FHA mortgage in default.
- You have equity in the house
How Do I Know if I Qualify for Any of These Alternatives?
Your lender will determine if you qualify for alternatives 1 through 3. A CERTIFED Short Sale or foreclosure expert, licensed Real Estate agent can determine if a Short Sale will work.. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender. Call (800) 569-4287 or TDD (800) 877-8339.