Understanding Your Options

There are several options available to help you avoid foreclosure. You can discuss these with your lender but remember – the earlier you contact them the more options you will have to help you. You may not be eligible for all of these options but you and your lender can determine how best to move forward.

Making Home Affordable Program

The Making Home Affordable Program provides help to homeowners who are struggling with paying their mortgage payments or anticipating trouble. Find out if you are eligible for assistance through this program.

Workout Options

If the Making Home Affordable Program is not an option for you there may be other alternatives. By working with your lender you can determine if you are eligible for any of the following workout options:

• Refinance: If you have enough equity in your home, your new mortgage could pay off the old loan along with any late fees and attorney fees. If you decide to pursue a refinance, remember to shop around for the best terms and compare the Annual Percentage Rate (APR).
• Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.
• Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
• Repayment Plan: This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
• Loan modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. The President's plan also offers loan modification, visit our page on the President's Making Home Affordable Program for more information.

Depending on your circumstances it may not be possible to keep your home. But there are still options available to you including to prevent foreclosure:

• Short Sale or Short Payoff: In cases where you sell your home for less than you owe, your lender may accept the lesser amount.
• Deed-in-lieu of foreclosure: Your lender may accept the voluntary transfer of the title of your home back to them in exchange for cancellation of your mortgage debt. This approach may have tax implications for you, and it may not be possible if there are other liens against your home.
• Assumption: This option permits a qualified buyer to take over your mortgage debt and the mortgage payments, even if the mortgage was originally non-assumable.

Be aware that some workout options affect your credit rating more than others. Foreclosures, short sales and deeds-in-lieu of foreclosure are considered "not paid as agreed" and may have serious negative impact on your credit score. That is why it is important for you to get help early to try to prevent further damage to your credit. For more information about your credit and how alternatives to foreclosure may affect it, visit www.myfico.com.

Don't Give Up!

It is important you understand what foreclosure means and why it is so important to get help early to avoid it.

Foreclosure is a legal process by which the lender takes back ownership of mortgaged property (for example, a home) and sells it because a loan is in default, or in other words, because the owner is delinquent with the mortgage payments. The process of foreclosure is different in every state. In some states, a non-litigated foreclosure can take as little as 32 days. In other states, it's a process that could take more than a year. In either case, the results can be devastating:

• You would lose any equity in your home. If you have equity in your home or your home has increased in value since your purchase, a foreclosure could mean the loss of thousands of dollars in equity.
• Your credit score would take a big hit. With a foreclosure on your credit history, you will have future difficulty borrowing money, renting an apartment, and perhaps even getting a job.
• Finding a new home will be a challenge. Not only must you find some place that's affordable, you'll also need to come up with a rental deposit, which the landlord could drastically increase, based on your credit rating.
• The interest rates on your credit cards could increase as the credit card companies view you as an increased risk.
• You could even be hit with a bill for taxes on the amount of mortgage that the lender was never able to recover from the sale of the property.