Options Other Than Foreclosure

Reinstatement

Reinstatement essentially means that the homeowner becomes current with the mortgage by paying up all missed payments and fees.  After full payment, the homeowner can continue to pay the mortgage payments under previous terms.

Forbearance 

Forbearance or a re-payment plan allows the homeowner to negotiate repayment of missed payments and fees to reinstate the mortgage.

Sell the Property

When there is enough equity in the property, the home can be sold and the foreclosure can be "cured". If the home is ‘under water’ or worth less than is owed plus sales expenses then a short sale must be negotiated. 

Rent the Property

Renting the property is an option so long as the mortgage is made current. A rental agreement will not stop the foreclosure process.

Refinance

While mortgage companies have become more restrictive, refinancing can be a reasonable option if the homeowner’s credit rating is not badly damaged.  When interest rates are favorable, a refinance may reduce the monthly payments.

Deed-in-Lieu of Foreclosure

In the case of a Deed-in-Lieu of Foreclosure or ‘friendly foreclosure’, the bank agrees to take the property back without the lengthy process. When there is equity, this is not an optimal solution.  The owner gives up the right to the property and any equity. This option is recognized as a foreclosure and will be reflected on the credit report.

Bankruptcy

Bankruptcy does not avoid foreclosure but it may allow the owner to reorganize debt and postpone foreclosure. Bankruptcy proceedings also make it difficult to sell a property as third parties are part of negotiation. 

Short Sale

A short sale can be negotiated and an approval obtained from the bank to accept an amount less than is owed when the homeowner is ‘under water’ or owes more than the property is worth plus sales expenses.

Most of the options described above involve negotiation with the bank and an acceptable credit rating. If credit has been affected by missed or short payments, the only feasible option is a short sale.