Alternative Solutions to Foreclosure

Chapter 13 bankruptcy.
This will stop all foreclosure proceedings and allows the homeowner to make a monthly payment, which is applied to all credit accounts as outlined in the bankruptcy payment plan. Once the payments are caught up, then the bankruptcy is dismissed. The bankruptcy is reported on the credit for up to ten years.

Short sale.
A short sale is when the mortgage company allows the mortgage note to be discounted for less than what is owed to allow the property to be sold. This process can take anywhere from 90-120 days. However once the sale closes, the delinquent mortgage is paid off and the homeowner has no other obligation to pay the difference of what is owed and what the property sold for.

Subject to Transaction.
How this works is an investor will come in a pay of the late payment to bring the note current in exchange for the deed to the property. The investor will then lease the property back to the homeowner for a specified time. After the period the homeowner than buys the property back from the investor. While this option does allow the homeowner to stay in their home, one should be very careful when considering this option because if one is not careful, the homeowner could be just signing their house over to someone. It is recommended that the homeowner consult with a good real estate attorney before going this route.

Forbearance or the loan work out.
Here the homeowner works with their mortgage company to work out a payment plan to get the mortgage caught up. Usually, depending on how far the payments are behind the mortgage company will require some money upfront and they will increase the mortgage payment a few hundred dollars extra. Once the payments are caught up, the loan is reset.


Loan modification.
This option requires that the mortgage company change the loan terms of the existing loan to lower the monthly payments like a rate and term refinance without the loan application. Mortgage companies are starting to receive more pressure to be more proactive in working with home owners facing foreclosure so more and more mortgage companies a calling their customers to offer this option however if the homeowner hasn't been contacted by their mortgage company, they can most certainly request a loan modification.

Loan on Stasis.
This is a solution that the mortgage company doesn't talk much about. A loan stasis is stopping all payment for a short period of time much like when a student loan is deferred. After that time is expired the loan resume as before.