Foreclosure Alternatives Worth Considering

by Simon Lindsay on General

It is a sad fact that the new housing law signed earlier this week will only be able to accommodate around 500,000 troubled borrowers. This means that millions of homeowners will still have to face their foreclosure dilemmas without the benefit of assistance from the government.

Among the foreclosure alternatives you can explore if you are struggling with mortgage payments are deed in lieu of foreclosure and short sales.

Both of these foreclosure alternatives will provide you with a way to avoid the painful process of foreclosure. Of course, you will have to accept that you will lose your home and your credit score will be adversely affected.

A deed in lieu of foreclosure will involve the homeowners handing over the property to the lender, giving up whatever equity they have left in their homes. In exchange, the lender will agree not to proceed with the foreclosure filing. This also saves the lender from spending on foreclosure costs.

On the other hand, a short sale will involve the lender agreeing to sell the distressed property for a discounted price, usually to a third party. The homeowner will be the one responsible for finding buyers. If the sales proceed is not enough to settle the mortgage debt, the lender will have to agree to forgive the amount.

By choosing one of these foreclosure alternatives, you will finally be able to get rid of your mortgage debt once and for all. For most people, it is a relief not having to think about of such problems anymore.

As for the impact on your credit score, the good news is that these foreclosure alternatives will be kinder unlike a foreclosure record. Also, any one of these two alternatives will involve a relatively shorter waiting period if ever you decide to take out a mortgage loan again.

If you are at your wit’s end and is considering anyone of these options, you should know that you will need to give a “letter of hardship” that contains the reasons why you are no longer able to meet your mortgage obligations. This letter shall be given to your lender, subject to their scrutiny.

Most lenders are agreeing to these foreclosure alternatives because it will save them time and money in the long term.