Foreclosure can be avoided. The following choices are alternatives to foreclosure. The most common alternate choices are:

Short Sale

      Short sale is a sale of the homeowner's property to a third part for an amount that is less than the amount owed. This must be done with the lender's approval. If done properly, the lender releases the borrower from his debt obligation, and both parties avoid actual foreclosure.

Short Sale Advantage: Decreased damage to a borrower's credit rating

      A foreclosure will likely remain on your record for up to seven years. Most credit applications require a truthful answer to the question "have you been in foreclosure in the last 7 years". A short sale is not a foreclosure. Instead, most lenders will record the event as a "settled account", which allows a borrower to truthfully answer "no" to the question. Additionally, a borrower's FICO score will not likely fall nearly as much as it would in a foreclosure, which makes subsequent borrowing easier and less expensive.

Short Sale Advantage: Reduced liability

      In a foreclosure the lender will typically repossess the property and sells it. To the extent the property sells for less than the total amount owed (including the cost of foreclosure, all back interest, legal fees, penalties, the cost to renovate the property and list it with a real estate broker), the lender may hold the borrower financially liable for the deficiency under certain circumstances. In a short sale, the lender will typically issue a statement that releases the borrower from liability. It is important for any borrower to confirm with the lender that this is the case.

Reinstatement

      This means that the homeowner makes payments sufficient to bring the loan current. This will usually include all back interest, late fees and any penalties. Once reinstated, the homeowner must continue to make payments in accordance with the terms of the mortgage note.

Modification

      In a note modification, then lender may agree lower the interest rate, extend the maturity date or to allow the homeowner to add the past due amount to the balance of the loan.

Forbearance

      Sometimes when a borrower faces a temporary difficulty, such as illness or temporary disability resulting in a temporary loss of income, a lender may agree to allow the homeowner to delay their mortgage payments for a brief period and arrange an alternate payment plan to make up for missed payments over the course of several months.

Deed-in-lieu of Foreclosure

      With a Deed-in-lieu of foreclosure the borrower agrees to transfer title back to the lender to in exchange for forgiveness of the debt. In doing this, both parties avoid actual foreclosure.

Other Options

      Your lender may provide additional options. It is important that you maintain contact with your lender to understand all your options.