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You Have Options to Stop Your Foreclosure


Banks need to save themselves, which means they are on the defensive. As long as the workout works for them and for you then it will be a win-win situation.

Your loan modification has not been approved or is going nowhere, there are other options.

Reinstatement is the process of bringing the loan current. Bringing the loan current entails paying all missed payments, fees and penalties owed to date. This works if you should have money saved for a rainy day or a relative or relatives willing to help you pay the arrears.




Forbearance is an agreement between the lender and the borrower that reinstates the delinquent loan through the payment of a lump sum or a schedule of payments over a period of time. This would be the option for someone going from unemployed to an equal or better paying job.

Mortgage Refinancing is an option where the existing lender or a new lender would allow the borrower to refinance his or her existing mortgage, wrap in any late payments and fees, and cash out part of his or her equity in the home to allow the borrower to regain control of a debilitating financial situation. Once is default you cannot get a refinance. An asset based or hard money loan are the only options.

Second Mortgage/ Line of Credit the existing or a new lender may offer a second loan or junior lien to a borrower in order to make up any back payments, late fees and other charges necessary to reinstate the loan. The borrower, in return, will be required to make an additional mortgage payment to cover the principal and interest payments on the second loan.

Sale of Home if the owner has been unable to work with the existing lenders, or find new lenders to complete a loan transaction in a timely manner, it is time to get serious about selling. The sooner the owner starts preparing their home for sale and listing it for sale with a licensed real estate professional, the better the chances are that the owner will get a fair market offer to purchase their home. A short sale is also an option. With a short sale, one must negotiate with the lender not to receive a 1099c.

The basic explanation of a 1099c, the lender reports the short sale difference of the forgiven amount as income to you the homeowner. For example, if you have a defaulting loan for $500,000 and the lender allows a short sale of your home for $250,000. The lender reports the difference as earned income to the IRS. You will receive a 1099c stating you have an income of $250,000 from the lender. The difference may have originally seemed forgiven but it was not forgotten; nor will the IRS forgive the payment on the taxable amount.

Deed-in-Lieu of foreclosure is a voluntary conveyance of title to the lender. Generally this is a last ditch effort by the borrower to avoid the negative consequences of foreclosure. The borrower may be released of personal responsibility for the mortgage, in return for the voluntary conveyance to the lender. If there is a junior loan then this is not an option.

Any of the aforementioned options are better than allowing a foreclosure by simply doing nothing.

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