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ALTERNATIVES TO FORECLOSURE
These are examples of possible alternatives to foreclosure. You may want to call your lender to see what options they may offer you.
Reinstatement
Mortgage servicers are often willing to accept the total amount owed to them in a lump sum by a specific date. Often, they will combine this with a forbearance option (see below.)
Repayment Plan
When you fall behind or anticipate that you will fall behind on your mortgage payments, call your servicer immediately. You may be able to work out an agreement where you make partial payments now and resume your regular monthly payments later. After the partial payment period ends and you have resumed making regular monthly payments, the servicer will expect you to pay extra each month until you are current on the loan.
Forbearance
The loan servicer may agree to reduce or suspend payments for a few months, until you get back on your feet financially. A forbearance is not for an indefinite period; it might be for one, three, or six months. After that, you'll be expected to make full payments on time.
Forbearance is most commonly offered to disaster victims and people who have lost their jobs but who feel confident they'll find well-paying employment quickly. Additionally, the money may come from a hiring bonus, investment, insurance settlement, or a tax refund. After the forbearance period ends and you've resumed making monthly payments, the servicer will expect you to pay extra each month until you're current on the loan.
Partial Claim
Certain government loans, such as from the FHA, contain provisions that let borrowers who meet specific criteria apply for another loan, to finance previously missed payments.
Loan Modification
If you are unable to afford the total amount of your current payment, the servicer could work with you to change the loan permanently. The servicer agrees to alter the loan, but with few or no fees. The servicer may add the missed payments to the existing loan balance, change the interest rate, including making an adjustable rate into a fixed rate, or extend the number of years you have to repay.
Short Sale
A short sale means that you sell your house for less than you owe. This can be done in a variety of ways. Your servicer must agree to the short sale and be willing to accept less than the full amount owed.
Mortgage Assumption
A mortgage assumption permits a new qualified borrower to take over both the title to the property and the mortgage obligation from you if you are behind in payments.
Deed-in-Lieu of Foreclosure
As a last resort, it may be best to give the house back to the servicer. Your servicer may agree to forgive your debt if you voluntarily hand over the deed to the property so the servicer can take possession of the house and sell it. This option works best if you can no longer afford to make your payments and you want to give up your house and avoid a foreclosure. You will also not owe your servicer any more money.
Disclosure: This is not intended nor should be construed as legal advice. This information is intended to enlighten homeowners of the programs that may be available. For legal advvice please consult an attorney.
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