Six Home Foreclosure Prevention Strategies

Anyone facing home foreclosure knows howsuited for individuals facing temporary setbacks and
stressful and devastating it is. Individuals experiencingcertain they can pay missed loan payments on the
temporary financial setbacks must be proactive indue date. Otherwise, mortgage forbearance could
contacting their lender to determine if they are eligiblelead to foreclosure.
for foreclosure prevention strategies. Contrary toLoan modifications involve modifying loan terms.
popular belief, banks really do not want to forecloseBanks can either temporarily reduce principal amounts
on properties unless no other options exist.or offer a reduced interest rate. When mortgage
Several home foreclosure prevention strategies areloans are modified, the terms are extended to
available. The method used is determined by multiplerecapture reduced payment amounts.  
factors including: loan payment history, credit score,Mortgage refinance requires borrowers to take out a
ability to make future payments, and employmentnew home loan to pay off the existing mortgage.
status.Refinancing is best suited for individuals with good
Delinquent loans are managed by the lender's losscredit and the financial ability to pay refinance rates.
mitigation department. Borrowers are assigned to aBorrowers are responsible for costs normally
loss mitigator who will help devise a suitable paymentassociated with taking out a home loan including real
plan to cure mortgage arrears or develop strategiesestate appraisals, home inspections, loan application
which lessen the blow of foreclosure.fees, legal fees, and closing costs.
To achieve a successful outcome, borrowers shouldMortgagors who can no longer afford home loan
have a basic understanding of available options.payments might qualify for real estate short sales or
Mortgage lenders typically offer options whichdeed in lieu of foreclosure. Both strategies can cause
minimize their financial losses and might not beserious harm to credit ratings. Borrowers could be
forthcoming with all available strategies. Those whoheld liable for deficiency amounts between loan
become familiar with foreclosure prevention optionsbalances and the actual sale price of the property.
will have a better chance of reaching an agreementReal estate short sales are rather complicated and
that can lessen credit damage.take several months to complete. The process of
The simplest and least costly option is loanshort selling varies by lender, but involves selling the
deferment which allows mortgagors to skip up toproperty for less than is owed on the home loan.
three loan payments. Missed payments are rolled toDeed in lieu of foreclosure requires borrowers to
the end of the loan and payment terms extended.return their property to the lender and vacate the
Banks usually require borrowers to submit financialpremises. Although a mutual agreement between
records to show they have the financial means tobanks and borrowers, this strategy is reflected as a
make future payments. Lenders often requirehome foreclosure on borrowers' credit reports and
borrowers to submit a letter of hardship outliningwill be reported for up to 7 years.
details that led to mortgage default.Mortgagors must be proactive in communicating with
Real estate forbearance agreements allow borrowerstheir lender in order to prevent foreclosure or
to skip up to 12 payments. However, banks usuallyminimize impact to credit scores. Individuals who
limit to 3 or 4 payments. Once the forbearanceignore phone calls and collection letters will limit
agreement expires borrowers must pay the fullavailable options and eventually face the harsh reality
amount of missed payments. This option is bestof foreclosure.