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Are There Any Foreclosure Alternatives?

Buying a home is a big step and a huge financial commitment. From the down payment to monthly mortgage payments, and all the repairs, maintenance and upkeep costs, a lot of money is tied up into homes. For many homeowners, the equity earned on their properties and the security of homeownership is well worth the considerable investment.

Foreclosure

With so much time, money, and resources invested into their houses, many homeowners cannot imagine what it would be like to lose their properties. Unfortunately, when hard times hit, the possibility of losing a home to foreclosure is very real if property owners fall behind in their mortgage payments. Before the home is repossessed by the bank or lender, many homeowners will go to great lengths to prevent this loss. In doing so, they will explore any of the alternatives available to them in order to avoid foreclosure.

What is Foreclosure?

Foreclosure is a legal process that allows a mortgagee (lender) to take ownership of a home from the mortgagor (homeowner). Each state has different laws that govern this process. The most common type of foreclosure is done by judicial sale. As its name suggests, foreclosure by judicial sale is overseen by courts. This is usually a longer process than the other type of foreclosure which is done by power of sale. In a power of sale foreclosure there is no court supervision.

Whether a house is foreclosed on by judicial sale or power of sale, the proceeds must first be used to pay off the mortgage. After that, any lienholders are paid next. If there are any funds left after paying off the mortgage and lienholders, the remaining balance of the home’s sale would go to the mortgagor.

Exploring Foreclosure Alternatives

When a homeowner is committed to staying in their homes and avoiding foreclosure at all costs, there may be some alternatives available to them. Since each state takes a different approach to foreclosures, a good place to start fighting the process is by consulting with a foreclosure defense attorney. A real estate lawyer well-versed in state-specific foreclosure proceedings will be able to detail the specific alternatives available to you. He or she may also be able to initiate proceedings that give you more time to carefully weigh the options that apply to your situation.

Talk to Your Lender

If you fall behind on your payments, your lender may be able to work with you to help get your mortgage current. Some common ways lenders can assist include:

Special Forbearance

Lenders may temporarily reduce mortgage payments or suspend them for borrowers in certain financial situations. This allows the mortgagor to enter into a payment plan that is feasible based on their current financial circumstances.

Partial Claim

Some borrowers may qualify for a one-time payment from a FHA Insurance fund. This single payment is used to bring past due balances current so that the mortgagor can focus on making full monthly payments going forward.

When Saving Your Home Isn’t an Option

After all avenues which allow a homeowner to remain in their home are exhausted, it may be necessary to look at voluntary options for giving up a house. Although the homeowner will still lose their home, it will not be as damaging to them or their future financial health than the traditional foreclosure process.

For example, homeowners can willing enter into a pre-foreclosure sale or, as a last resort, voluntarily “return” the home to the lender. A foreclosure attorney can advise you on all the options available to you as you work to lessen the impact of losing your home.

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