It’s important to know your options and understand all the potential solutions that may be available to help you avoid foreclosure. It’s also important to understand what can happen if you fail to take action and foreclosure becomes unavoidable. The process can be stressful, embarrassing, and it can have long-lasting consequences.
For example, foreclosure could result if you:
• Owing the mortgage company the deficiency balance of your mortgage (the deficiency balance is the remaining total mortgage balance after the sale price of the home)
Keep in mind, your mortgage company doesn’t want to foreclose on your home. Just like there are consequences for you, the foreclosure process is time-consuming and expensive for them. They want to work with you to resolve the situation. However, some homeowners simply don’t take advantage of the help available and foreclosure becomes the only option.
Required Documentation
What is a Refinance?
With this option, you receive a completely new mortgage with new terms, interest rates and monthly payments. The new loan completely replaces your current mortgage and may lower your payment, which could help improve your monthly financial situation.
Refinancing may be an option if:
• You are current on your mortgage payments
• If you haven’t been more than 30 days late in the last 12 months. If you have made a late payment, you may still qualify for the government’s Home Affordable Refinance Program
• You have an adjustable rate mortgage or a high interest rate
• You have equity built up in your home
• If you don’t have any equity, you may still qualify for the government’s Home Affordable Refinance Program
What is a Modification?
Under this option, you reach an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount.
A modification may be an option if:
• You are ineligible to refinance
• You are facing a long-term hardship
• You are several months behind on your mortgage payments or likely to fall behind soon
You may also qualify for the government’s Home Affordable Modification Program, which was designed to help borrowers make their payments more affordable.
What is a Short Sale?
A Short Sale, also known as a pre-foreclosure sale, or a short pay off, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage company agrees to a short sale, you can sell your home and pay off all (or a portion of) your mortgage balance with the proceeds from the sale.
A short sale is an alternative to foreclosure and may be an option if:
• You are ineligible to refinance or modify your mortgage
• You are facing a long-term hardship
• You are behind on your mortgage payments
• You owe more on your home than it’s worth
• You have not been able to sell your home at a price that covers what you still owe on your mortgage
• You can no longer afford your home and are ready or need to leave
You may also be eligible for the government’s Home Affordable Foreclosure Alternatives Program (HAFA) which offers a short sale option.
What is a Deed-in-Lieu?
A Deed-in-Lieu of Foreclosure (DIL) is where you, the homeowner, voluntarily transfer the ownership of your property (the title and all property associated with it) to the owner of your mortgage in exchange for a release from your mortgage loan and payments.
A DIL is an alternative to foreclosure and should be considered if:
• You are ineligible to refinance or modify your mortgage
• You are facing a long-term hardship
• You are behind on your mortgage payments
• You owe more on your home than it’s worth
• You don’t want to sell your home or haven’t been able to sell your home
• You can no longer afford your home and you are ready to leave
You may also be eligible for the government’s Home Affordable Foreclosure Alternatives Program (HAFA) which offers a Deed in Lieu option.
What is a Foreclosure?
A foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossess the property). A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan. A foreclosure can usually be avoided—even if you already received a foreclosure notice. However, you must take action as soon as you can.