Alternatives to Foreclosure
If you have faced a summons of foreclosure due to unemployment, divorce, bankruptcy, or probate, there are some alternative to foreclosure.

 


1. Consider modifying your current loan
—Contact your mortgage holder and ask for assistance in modifying your loan. In some cases you will may not be required to make your mortgage payment during this modification, but you must clarify this with your mortgage lender.

2. Ask for a forbearance—Some lenders may put a temporary payment reduction or suspension on payments based on the homeowner’s financial situation.

3. Reinstate—If you pay the entire amount due in default your mortgage will be reinstated.

4. Secondary loan—some call this a partial claim. Obtain a second loan to cover the back payments, costs, and fees that have accumulated.

5. Refinance—If you have equity in your home, and income allows, you can attempt to refinance your home at a different interest rate and extend the years out.

6. Deed in Lieu of foreclosure—This is the process of turning in your keys to the bank, because you cannot pay your mortgage. The lender then sells the property in order to payoff the amount you owed on the property. The lender marks the borrower’s note as “paid” and provides them with two forms, one which states the debt is canceled and the other which refers to the waiver of the right to a deficiency judgment (The lender’s right to ask for the unpaid debt amount if it is not recovered totally by the property sale. There might be a few tax consequences. The lender might send you a 1099 form stating that you had a gain on the sale of the property. You should consult with your tax consultant about how to file this gain on your income tax forms.

7. Bankruptcy—Contact an attorney to determine if this is an appropriate measure for you and if a Chapter 7, Chapter 13 or Chapter 11 makes sense for you.

8. SELL—Consider listing the home with an agent or finding an investor to purchase the property from you before the home goes into foreclosure. You can negotiate the commission you pay to a Realtor, and when selling to an investor you will have little to no money out of your pocket.

9. Do Nothing—If you do not respond to the correspondence that the bank has sent to you, you will most likely face foreclosure. This will affect your credit and in most cases one will not be reconsidered for a mortgage loan for at least 3 years.