Option 1: Pay Cash to Reinstate your Loan
Of course the quickest resolution is to find out the total that is owed and pay it in full. By state law the homeowner has the right to pay back this amount before the foreclosure and banks are required to accept it and stop the foreclosure.

Option 2: Modify your Loan with your Lender

If it is possible to make regular payments now, but not possible to catch-up the past due amount, the lender might agree to modify the mortgage. One resolution the lender may propose is to add the past due amount into the existing loan and finance it over a long term. Modification might also be feasible if it is no longer possible to make payments at the former level. The lender may modify the mortgage to extend the length of the loan (or take other steps to reduce the payments). Most often the changes are temporary.

Option 3: Refinance

A refinance will require the borrower to have a significant amount of equity. Also because your credit has been hit with late payments your interest rate will most likely not be ideal.

Option 4: Sell Property

Selling is often the best option unless your financial setback is very temporary or you can restructure your debt to get lower payments. Selling your property when you owe more than what your home is called a short sale.

Option 5: Short Sale

A short sale is a process by which the mortgage lender takes less than what is owed on the house so the property can sell. Short sales can be a great method of debt relief, but is it does involve selling your house. It is important to work with an experienced investor and real estate agent if you choose to pursue this option. Stewardship Properties has successfully purchased over 50 short sales over the past 12 months and is currently working with 100 homeowners in difficult situations, with several approvals each week.

Option 6: Bankruptcy

Disclaimer: Please consult with a qualified attorney before choosing this option.

Advantages of bankruptcy include the debtor’s ability to stop foreclosure without creditor acceptance and encompassing more than just the mortgage debt with a single action. In most cases bankruptcy comes as a last resort. Bankruptcy can remain on credit scores for as long as 10 years though.

Chapter 13 can stop a creditor from foreclosing on a delinquent debtor over a period of years. Under Chapter 13 the court retains the right to scrutinize finances of the debtor for the life of the reorganization plan. Filing chapter 7 bankruptcy could in essence wipe your excessive debt of foreclosure.

Option 7: Deed in Lieu

A deed in lieu of foreclosure is simply giving the property to the bank in return for avoiding foreclosure. The bank has the right to charge you the deficiency, the difference between home’s value and amount owed plus arrearage and legal fees. Typically the home is worth less than what is owed and the bank will charge you for that difference, leaving you without a home and with a lot of debt. A deed in lieu of foreclosure does have a negative impact on your credit record, but not as much as a foreclosure.

Option 8: Do Nothing

The easiest thing to do is nothing at all. The bank will file a notice of default and the property will be sold at foreclosure auction or taken by the lender. After the sale the occupants typically have 10 days to vacate. Federal law (Fair Credit Reporting Act) requires that any negative remarks be removed upon request after 7 years. Foreclosure is arguably the worst thing for a credit report.

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