In recent years, a number of lenders offered promotional 'teaser' rates to tempt people into buying homes. Today, many people are feeling the pinch as those teaser rates come to an end and each mortgage resets to the actual interest rate. In fact, foreclosures are near record levels because of these teaser rate resets.

If a homeowner cannot meet their monthly mortgage payment once or twice, often, the lending institution will easily and happily forgive it, and simply expect the homeowner to 'double up' on the next payment. This makes sense because things happen to all of us from time to time when there just isn't quite enough money in the bank to make the mortgage payment.

But after a series of missed payments, warning bells go off at the lending institution. They become worried that their investment in the borrower ? the homeowner ? is at risk of default. At some point, usually after about 3 months of defaulted payments, the lender will file a Notice of Default with the county recorder. The notice is mailed to the borrower and other affected parties.

Homeowners who receive a Notice of Default still have a few options available to them; all is not lost! Among their options are special forbearance, partial claims, deed-in-lieu of foreclosure, loan modification, and even bankruptcy. If these options fail or disappear before the homeowner takes advantage of them, the mortgage or trust deed agreement will ultimately end in a foreclosure. That's something that no homeowner wants: to lose a home AND have a foreclosure on their credit rating.

Homeowners who have received a Notice of Default have another option: the short sale. A 'normal' sale occurs when someone sells a home and there is enough equity in their home to cover all liens and encumbrances including, but not limited to, mortgage(s) or deed(s) of trust, judgments, property taxes, and costs of sale. A short sale occurs when someone sells a home but there is no equity in the home to cover all liens and encumbrances.

To qualify for a short sale, the homeowner needs to provide a number of things to the realtor: First, they need to provide some mortgage/trust deed details, including the most recent home loan/mortgage statements, and the Notice of Default, if any. Second, they need to supply some financial information to prove that they have been, and will continue to be, unable to keep up with their home loan payments. This financial information includes, among other things, a copy of their most recent tax return, the last two or three pay stubs, and the most recent bank account statements. Finally, the homeowner needs to write a 'hardship letter' which describes, in the homeowner's own words, the cause and severity of their financial situation.

Homeowners should do their best to keep up with their regular mortgage payments. However, if things get tough and a Notice of Default is issued, there are options that the homeowner has. One of the best options for most is the short sale.

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