Foreclosure Solutions

Okay, although all situations are different, there are some general timelines depending on what the borrower intends to do with the property. If a borrower intends to hold on to the home, the minute they are behind or think they will fall behind, they should contact their lender (multiple times, if they don't feel they are getting the attention they require). Forbearance agreements allow lenders to accept half the past due amount to begin with, then break up the remaining arrear-age over 3-12 months. Provided all payments are made, this gets the borrower back on track. The downsides... borrowers may not have half the past due amounts (especially if they are multiple months behind), they still need to have the financial ability to cover the payments and they are still reported late to the credit bureaus until the  plan is complete and they are actually caught up.

Another option includes someone else "helping them" by providing the money to get caught up. There are many flavors of foreclosure-help advertised, but borrowers need to completely understand what is happening in the transaction and be EXTREMELY CAUTIOUS if they hear the words QUIT-CLAIM, LEASE BUYBACK, RENT-TO-OWN, etc. Ideally, for a portion of your equity, someone will front the money to get you caught up with the intention that you will sell your home or refinance within a certain period of time to pay back the original money plus profit. The downsides to this plan... if you quit-claim yourself off title, you don't really own your home anymore, even though you still have a mortgage. You may find yourself "renting" your own home and hoping the real owner is making the payments (otherwise your lender will still foreclose),; if you fall behind, you can be evicted by the new owner; and these deals typically are only profitable if you have 30% equity in your home.  For more information, please read "Dreams Foreclosed" by the National Consumer Law Center, a non-profit group.

http://www.virginialoanpro.com/resources/ForeclosureReportFinal.pdf

Quick Breakdown of some other alternatives:

The new FHA Secure program: still a full doc program, must have a history of on-time mortgage payments prior to an ARM adjustment, but now allows lenders to accept mortgage delinquency and get an FHA approval

Loan Modification: becoming more common, ideal scenario runs something like this. "I was okay, but then ______ (insert the specific event that caused you to fall behind). Now I'm back on track/back to work/out of the hospital/ etc and able to make the payments. I just need a little help." 

Deed in Lieu of foreclosure: The key to a successful negotiation is to allow the opportunity for a lender to take possession of the house without the time and expense involved in legal foreclosure, especially if foreclosure is inevitable.

Short-sale: THESE TAKE TIME and the latest figures I have seen indicate that less than 10% are approved by the lender and easily take 45-60 days. Sometimes, the only option at this point is foreclosure.