Alternatives to Foreclosure
Foreclosure is the legal means that your lender can use to repossess (take over) your home. Below are a few alternatives to foreclosure. Talk to your lender to see if you qualify for any of these plans for avoiding foreclosure.
Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.
Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if you are able to begin making full mortgage payments.
Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.
Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it is not as damaging to your credit rating as a foreclosure. You may qualify if you are in default and don't qualify for any of the other options; and your attempts at selling the house before foreclosure were unsuccessful.
How Do I Know if I Qualify for These Alternatives?
Your lender will determine if you qualify for any of the alternatives to foreclosure. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender.