Foreclosure Alternatives - How To Avoid Foreclosure

Avoiding Foreclosure:

Are you having trouble making your mortgage payments? Are you receiving collection calls from your mortgage lender? Have you received a collection letter or default notice? You are not alone.

With the economy in a slump, many homeowners are finding themselves facing the threat of foreclosure. If you are facing the threat of foreclosure, you may be surprised to find that there a number of alternatives to foreclosure. The foreclosure alternatives made available to you by your lender may depend not only on your circumstances but what type of mortgage you have.

Foreclosure Alternatives by Type of Mortgage:

• FHA and VA mortgages - the possible foreclosure alternatives are set by the U.S. Department of Housing and Urban Development (FHA) for FHA loans and the Veterans Administration (VA) for VA loans respectively.
• Conventional mortgages - the possible foreclosure alternatives are set by the lender that made the loan. These lenders may have sold your loan to Fannie Mae or Freddie Mac. If your loan was sold, the current owner of your mortgage will dictate your foreclosure alternatives.
• To determine the type of loan you have it is always best to contact your lender. You may also use the lookup tools below to see if you have a Freddie Mac or Fannie Mae loan:
  
  
  • Fannie Mae Mortgage Look Up Tool  or call 1-800-7FANNIE (1-800-732-6643)
  • Freddie Mac Mortgage Look Up Tool or call 1-888-995-HOPE (1-888-995-4673)
    
    
    

Common Foreclosure Alternatives:

- Alternatives to foreclosure when you can afford to keep the home
Sometimes clients may experience a temporary reduction in income or financial hardship, such as an illness. When this happens, they may temporarily be unable to make their mortgage payments. Once the situation improves, however, they may be able to resume the scheduled payment of the mortgage. In a situation such as this, the mortgage lender may look at the following options:

• Repayment Plan: The servicer may be able to arrange an increase in monthly payments until the loan is brought current. This means that each month your clients would add an additional amount of money (determined by the servicer) to their regular monthly payment until the amount that was overdue has been repaid.
• Forbearance: Forbearance is a formal, written agreement between your clients and the mortgage servicer to reduce or suspend monthly payments for a specific period of time. This means that for a period of time, clients would either pay only a portion of their regular mortgage payment or not make any payments at all. At the end of the agreed-upon period, the client would be required to resume regular monthly payments as well as pay additional funds to make up for the past due amount. During the time that the payments are either suspended or reduced, the client would have the opportunity to resolve the financial hardship they are facing.
• Loan modification: In situations where the servicer does not believe that a repayment plan or forbearance is the appropriate course of action, a loan modification may be considered. A loan modification involves changing one or more of the terms of a mortgage in order to help the client bring a defaulted loan current and prevent foreclosure. This option generally is considered for homeowners whose financial problems are expected to be more long term.

- Alternatives to foreclosure when you cannot afford to keep their home
As hard as you may try, sometimes financial hardships don't get turned around as quickly as you would like. These situations may include a long-term layoff, job loss, mandatory reduction in pay, disability or illness that results in a decrease in income or an increase in major medical expenses, or the death of the principal wage earner. In these instances, it may not be possible for you to continue to meet all of your financial obligations and the only appropriate course of action is relinquishing ownership of the home, while avoiding foreclosure. These alternatives include:

• Assumption of the loan: An assumption is a method of transferring a house to a new buyer who agrees to take responsibility for (assumes) the existing mortgage. Not all mortgages are assumable, so this option must first be discussed with the servicing lender.
• Preforeclosure sale: A preforeclosure sale is the sale of a property in which the servicer and Fannie Mae agree to accept the proceeds of the sale, even though it may be less than the amount owed on the mortgage. To avoid going through a foreclosure proceeding, Fannie Mae and the servicer can agree to accept the proceeds of the sale in satisfaction of the mortgage loan.
• Deed-in-lieu of foreclosure: A deed-in-lieu of foreclosure takes place when you voluntarily give the deed to the property to the servicer. Generally, a deed-in-lieu is considered only after all other alternatives to foreclosure have been explored.