It is difficult enough for a homeowner to deal with the typical causes of a foreclosure, (i.e. divorce, job loss, chronic illness), these circumstances alone are often overwhelming. In spite of this, a homeowner should try to find the time to muster the energy to begin to evaluate the options that may be available. The following is a ten point general list of the different solutions that a homeowner can choose from. However, the homeowner should keep in mind that each solution is dependent on many factors which may include the homeowner's financial situation, the terms of the loan, the amount of the deliquency, the state the homeowner resides in, and the reasons for the delinquency. Sound professional advice from a lawyer and/or CPA should be sought if the the homeowner has the means to do so. In addition, the homeowner should seek as soon as possible to speak to the lender to see what can be negotiated on the homeowner's behalf.

1. Reinstatement of Loan (Cure): This option is paying the lender everything that is owed in one lump sum to include missed payments, any late fees associated with these payments, foreclosure fees, legal fees and the principal owed during the delinquency.

2. Repayment Plan: This is a written agreement between the lender and the homeowner. These plans require higher payments than the regular monthly mortgage amount for a period of time until the loan is brought up-to-date.

3. Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), or extend the term of the mortgage. Usually the lender will require proof of extreme hardship in order to modify the loan.

4. Forbearance Agreement: The lender will allow the homeowner a period of time (3-6 months typically) of either lower payments or no payments at all depending on the the homeowner's proof of hardship or constrained financial circumstances. Unless the loan term is extended (which happens rarely), when the payments are due they generally will have to be higher than the original monthly mortgage payments until the loan is brought current.

5. Special Forbearance (FHA Loans only): Allows eligible borrowers to postpone monthly mortgage payments for a minimum of four months. While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI (principal, interest,taxes and insurance) installments.

6. Deed-in-Lieu of Foreclosure: A Deed in Lieu is an option in which a borrower voluntarily deeds collateral property(usually the home) in exchange for a release from all obligations under the mortgage. A Deed in Lieu may not be accepted from borrowers who can financially make their payments. If a borrower qualifies for a Deed in Lieu program they may be eligible for cash back from the lender.

7. Cash Sale To An Investor or Individual Third Party: The homeowner is able to sell the property, pays off any outstanding loans, and, depending on the homeowner's remaining equity, may net some cash out of the deal. The challenge to the homeowner will be to sell it quickly enough within the time frame alloted, in order to satisfy the outstanding loan. Usually, a quick sale requires a substantial drop in the price. However, the homeowner's credit may be preserved.

8. Short Sale: The homeowner negotiates an agreement with the lender to sell it for less than is actually owed (usually in writing), hires a realtor and sells the property. This generally results in no cash to the homeowner, but will be better in the long term for his credit rather than a foreclosure that proceeds to foreclosure auction.

9. Refinance: The homeowner may be able to refinance and get a new loan, but generally this is difficult because the borrower has little equity and poor or damaged credit. The new loan will likely have higher payments than the old loan and thus will make the homeowner less likely to qualify.

10. Do Nothing: The worst choice a homeowner can make is to not do anything. His credit will be ruined, however the homeowner be able to occupy the house, but will be forced to move when the lender or the high bidder from the foreclosure auction eventually evicts the homeowner. Surprisingly, given all the other options that are available, many homeowners choose this route which unfortunately usually has the most damaging consequences--financially and emotionally .

Reviewing these options and gaining an understanding of them will prepare the homeowner for the variety of business people that will contact him or her during this time. It should also give the homeowner a clearer idea of what choice is the best for his or her particular situation.

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