I received the March 2009 Dallas County pre-foreclosure list with over 2000 property owners who have received a foreclosure notice. Please, do everthing you can to avoid foreclosure. There are two things that will follow you the rest of your life and those are a felony conviction and a foreclosure. True, after 10 years a foreclosure will drop off your credit report, however, almost every lending institution has the magic question, Have you ever had a foreclosure? If you have had one, you must answer yes. Answering no would be considered fraud, and that would open you up to a host of legal problems.
Here are a few options and a quick list to block foreclosure.
1. Reinstatement: This is where the homeowner reinstates the mortgage by paying up all missed payments and fees and becomes current with the mortgage. After all the fees have been paid, the homeowner can continue to make regular mortgage payments.
2. Forebearance: Commonly known as a repayment plan. This allows the homeowner to negotiate a re-payment of missed payments and fees to reinstate the mortgage.
3. Sell the Property: If there is equity in the property, then the property can be sold and the foreclosure can be "cured", preventing foreclosure.
4. Rent the Property: The property can be rented, however the mortgage must be made current. A rental agreement will not stop the foreclosure process.
5. Refinance: If the credit rating hasn't been too badly damaged,a refinance may help especially if the monthly payments can be reduced.
6. Deed-In-Lieu of Foreclosure: Commonly known as the friendly foreclosure. The bank agrees to foreclose without the lengthy process. This is not recommended if there is equity in the property because the owner gives up the right to the property and any equity. This option is technically still a foreclosure and will show up as such on your credit report. Sometimes the bank will forego any other recourse, but that will have to be negotiated.
7. Bankruptcy: May allow the owner to reorganize debt. Can postpone foreclosure. Drawback is it makes it difficult to sell the property and nearly impossible to negotiate with 3rd parties.
8. Short Sale: When the homeowner owes more than the property is worth, a sale can be negotiated and an approval from the bank to accept less that the amount owed.
Most of these options involve negotiations with the bank and a decent credit rating. If the credit has already been tarnished, a short sale is the only real option. In my experience, when homeowers use the other options available, they wind up in the same predictament a few months down the road because the underlying cause of their situation was never resolved.
