Alternatives To Foreclosure

Remember this fact: Banks do not want to become real estate investors, banks want to be lenders and earn interest on that money. That being said, if you give a bank no choice but to foreclose, they will because they don’t want to drag out the process any longer than necessary. So, you have to give them reasons to believe that the loan is still viable, that you are still a good borrower, and that everything will one day be peachy. So, what alternatives are there to foreclosure?

Special Forbearance:
Everyone falls on hard times at one point or another so banks can be understanding, even if it feels like they’re cold monolithic creatures. You may be able to arrange an alternative repayment plan, a temporary reduction or suspension of payments, or some other special arrangement. What you’ll need to do is be up front with your bank, show the cause of the difficulty, and how you’ll get back on track.

Refinance or Modification of Mortgage
Whereas the first alternative is a temporary adjustment to your mortgage, this one refers to a more permanent adjustment by way of refinancing or modifying your mortgage terms to modify the amount you will have to pay each month. If you’re in an ARM that will adjust, say to 7%, then it may make sense to refinance to a fixed payment if the rates are in the 6’s. While you may incur some refinancing costs, those could always be rolled into the loan.

Selling in Pre-Foreclosure
This refers to selling your property before its foreclosed, which may allow you to recapture some of the equity you may have in the home.

Deed-in-lieu of Foreclosure
This essentially surrenders your home back to the bank, which won’t get you anything except escape from the messy and credit-damaging proceedings of an actual foreclosure.

So, those are your four options. Please seek a financial professional for an in-depth analysis of your particular situation, especially since laws in every jurisdiction is different, before making any decisions.