These are the most popular "options" an owner should consider when in default on their loan. Also remember that all these "options" will not be available to every seller.

---

1. Forbearance
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. If a borrower is behind in his payment, (because of a lapse in employment and now has income coming in again) the lender may allow the borrower to pay the money back through installment payments over six months. The lender may decide, on the other hand, to allow the borrower to pay a reduced monthly payment until the borrower has an opportunity to get back on his feet and pay any remaining arrearages in one lump sum.

The forbearance may be an oral agreement or written contract between the lender and the borrower. Generally these agreements will not exceed 12 months.

The owner should always ask himself this question, "If I could not make the payments previously, why will I be able to make them in the future, even if a get a temporary forbearance? Am I only delaying the inevitable, or was there a short term reason that made me get behind?"

---

2. Loan Modification
A loan modification is a change in any of the terms of the original note. This includes decreasing the interest rate, re-amortizing the remaining balance, extending the term of the loan, or other options at the lender's discretion to assist the borrower through a temporary setback.

Generally, a lender will consider a loan modification when foreclosure is eminent and the borrower's income has been decreased or he is unable to make the mortgage payments, but will be able to keep the loan current after the loan modification.

---

3. Mortgage Refinancing
Mortgage refinancing is an option where the existing lender (or a new lender) would allow the borrower to refinance his existing mortgage, wrap in any late payments and fees, and cash out part of his equity in the home to allow the borrower to regain control of a debilitating financial situation.

Refinances are generally open to borrowers that face a temporary setback in their financial situation, have shown an outstanding credit history, and can prove he can support the new mortgage payment.

---

4. Second Mortgage, Line of Credit
The existing lender (or a new lender) may offer a second loan or junior lien (often called a "hard money loan") 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. Hard Money Loan fees are typically 5-10 times the average loan fees for an "A Credit" borrower. Plus interest rates often rival credit cards.

Use caution before you choose a "Hard Money Loan," consider if you cannot make payments on your current loan(s), how can you make payments on a new more costly loan?

---

5. Sale of the Home
If the owner has been unable to work with the existing lender(s), or find a new lender 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 Realtor) the better the chances are the owner will get a fair market offer to purchase their home.

However, most owners will wait for "their pending new/refinance loans" and by the time they find out they cannot get financing, there is not enough time to "conventionally" sell the house with a Realtor.

The longer they wait, the more likely they will need to sell their house to an investor who offers "a quick closing, all cash transaction," and will pay significantly less than fair market value for the property. In addition, typically the owner does not have the money to repair the home and get top market value and will have to "discount" their sales price for any deferred repairs.

However selling the home to an investor quickly, in "as is" condition allows the owner to salvage his or her credit, pay off the loan(s), and retain any remaining equity in the home.

Need to sell your house for quick cash? Click here for more information.

In certain cases, the lender may allow the borrower to sell the home even when the proceeds from the sale are not sufficient to pay off the existing loan. This is known as a short sale. A borrower should check with his lender to discuss this option. Furthermore, the borrower may have to pay taxes on any loss the lender writes off from the short sale. A borrower should consult his tax professional before agreeing to a short sale.

What happens to my credit after a Short Sale? How a lender reports the transaction will vary from lender to lender.

It's most probable that the loan history of missed payments will remain on your record.

If the mortgage is foreclosed, that will remain on your record too.

If the property is sold at Sheriff's or Trustee's Sale, that blemish will haunt you for up to 10 years.

How you frame your request for short sale can determine how the lender reports the transaction. It is negotiable and should be discussed up front with the lender's account representative.

In some cases, the lender will report the mortgage as being paid as agreed. That's best.

Regardless of any of the discussion above, it's better to sell voluntarily (even short) than allow the foreclosure to result in a forced, public sale.

To sell your home quickly, we have investors who will purchase the home directly from you at a reasonable price where you may be able to save some of your equity. Contact us to find out how! If you prefer to speak to someone, call (813) 504-7854

---

6. Deed-in-Lieu of Foreclosure (DIL)
A 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. In return for the voluntary conveyance to the lender, the borrower is often released of any personal responsibility for the mortgage.

In order to qualify for a DIL, most lenders state there must NOT be a second mortgage or junior liens on the property. For properties with values in excess of the amount owed against the home (to include normal closing costs) consider selling the property before voluntarily conveying the home to the lender.

---

7. Bankruptcy Filing
Bankruptcy is a way for people who owe more money than they can pay right now ("debtors"), to either work out a plan to repay the money over time in a Chapter 11, Chapter 12, or Chapter 13 case, or wipe out ("discharge") most of their bills in a Chapter 7 case. While either the debtor is working out a plan or the trustee is gathering the available assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor. When the bankruptcy petition is stamped "Relief Ordered" at filing, you are immediately protected from your creditors.

What chapter you choose to file under determines what bills can be eliminated, how long payments can be stretched out, and what possessions you can keep. The Bankruptcy Code and the Federal Rules of Bankruptcy Procedure control other details. These are federal laws, which means they are applicable all over the United States. The Code and Rules are found in Title 11 of the United States Code. Click here for more information…

Think carefully before you choose Bankruptcy, as it will have serious financial implications to your life for the next 10 years! With the recent changes in the bankruptcy laws, this option is now not as desirable as it once was.

The bankruptcy petition, schedules and plan are public documents and are available to the general public for viewing. Credit reporting agencies regularly collect information from the petitions filed and report the information on their credit reporting services. Bankruptcies normally remain on your credit report for up to ten (10) years and will be taken into consideration by any person reviewing a credit report for the purpose of extending credit in the future. The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor depending on the type of credit requested. There is no law to prevent anyone from extending credit to you immediately after the filing; however, creditors are not required to extend you credit either. This includes potential landlords who may deny you if you need a rental to move into.

The best way for you to obtain credit in the future is to generate an adequate and regular income and pay all of your financial obligations in a timely and responsible manner. Many creditors will not deal with you in the future unless you have already established credit with someone else and demonstrate that you are a reliable debtor. In general, it is recommended that, after the filing of a bankruptcy, one must learn to live within his income and not request credit, but this is not absolutely necessary.

BEWARE: Many owners, who file bankruptcy and then later realize that they cannot keep their home and must sell it, find it impossible to find a place to rent. Many times after a bankruptcy and a foreclosure, getting a landlord to accept you, as a tenant, is an almost impossible task.