The first step in foreclosure prevention is to take control of your financial situation by understanding your income and your expenses. You will greatly reduce your anxiety when you understand where your money comes from and where you are spending it. Developing a budget is the simplest way to begin to understand your financial situation. Budgeting will help you plan for meeting your expenses as well as begin to build assets. To speak with a financial counselor about budgeting call 877-GET-HOPE or fill out the on-line assessment and a certified foreclosure prevention counselor will call you regarding your specific situation.

There are several different options to help borrowers avoid foreclosure. Some options allow borrowers to stay in their homes. Other options will require the borrower to forfeit their home, but they will be able to avoid foreclosure. It is important to explore the many options to avoid foreclosure. Even if retaining the home is not an option, it is important to preserve your good credit by avoiding foreclosure. Your future ability to buy or rent a home, car or other purchase that require credit will be affected by foreclosure.

Workouts that enable borrowers to stay in their home include:

Forbearance
The lender agrees to suspend or reduce the borrower’s monthly payment for a set period of time. The loan continues to accrue interest during a forbearance. A forbearance request must be approved by your lender. Most lenders are willing to enter into such an agreement if the borrower can pay at least 50% of the mortgage arrearage or 1 full month’s payment and is willing to pay the remainder in 24 months.
Repayment Plan
The borrower must agree to make incremental payments on top of regular monthly payments until loan is current.
Loan Modification
If a borrower can make payments on the loan, but does not have the funding to bring the account current, a loan modification may be an option. The borrower may be able to refinance the debt or extend the term of the original loan to make payments more affordable. Some options for modifications include, adding the missing payments to the existing loan balance, changing the interest rate, changing loan type (from ARM to fixed), or extending the years a borrower has to repay.

Workout options that enable borrowers to avoid foreclosure include:

Mortgage Assumption
The due-on-sale clause is waived and a qualified, creditworthy borrower would be allowed to assume the mortgage with few closing costs.
Preforeclosure Sale (Short Sale)
A Preforeclosure Sale or Short Sale allows a borrower to sell the property and pay off the mortgage loan to avoid foreclosure. The property is sold for less than the amount owed on the loan and the lender must agree to accept the “short” payoff.
Deed-in-lieu
A Deed-in-lieu is a last option to avoid foreclosure. The borrower voluntarily relinquishes the property deed to the lender to satisfy the debt and avoid foreclosure. The borrower must have attempted to sell the house before this becomes an option.