My Bank is trying to foreclose on my home. What are my Options?

If your lender is trying to foreclose on you property, you will typically have 7 options available to you. They are:

1. REINSTATE THE LOAN: This option will work for anyone who has come into a large enough sum of money to pay back all of the missed payments, late fees, attorney fees, and any other fees the lender applies.
   
   
2. REFINANCE: This is becoming more difficult and usually requires a substantial amount of equity in the property.
   
   
3. LOAN WORKOUT: Work with your lender to do either a Forebearance or a full Loan Modification. A Forebearance is a temporary reprieve from the foreclosure while you catch up on missed payments. A Loan Modification is when the lender agrees to modify either your interest rate, loan term (months to pay back the loan), reduces the principal owed on the loan, or some combination. Many banks are now working with homeowners to modify interest rates and loan terms to reduce monthly payments so that they fall within 31% to 38% of your gross income.
   
   
4. SELL: If you have lost enough income where you cannot qualify for a Loan Modification because you either cannot afford even the minimum payment or debt-to-income ratio exceeds a certain amount, your lender may ask that you sell the house. In today’s market of falling house prices, selling usually requires a Short Sale – an agreement in which your lender agrees to accept less than the full principal balance owed on the property at closing. By agreeing to this, the seller usually does not need to bring additional funds to the closing to pay off the balance of the mortgage.
   
   
5. DEED IN LIEU OF FORECLOSURE: This is where you hand over the deed of the house to your lender rather than going through the foreclosure process. You must qualify for a Deed in Lieu.
   
   
6. BANKRUPTCY: Filing either Chapter 7 or Chapter 13 will postpone a foreclosure, not prevent it. CONSULT AN ATTORNEY if you are considering Bankruptcy.
   
   
7. DO NOTHING: Let the foreclosure process simply run it’s course until the house goes to auction.

If you are falling behind in your mortgage, the MOST important thing to do is ACT! Either call your lender or a HUD Certified Housing Counselor. The U.S. Department of Housing and Urban Development is a good place to start as they have an overview of an action plan.