Foreclosure, Forbearance, Short Sale, Reinstate, Deed in Lieu of foreclosure

The homeowner could let the lender foreclose, ruining their credit.

The homeowner can use an agent to help them negotiate a Short Sale, which would be a charge off on their credit — so a “bruise” if you will– rather than a foreclosure, which gives them the option to buy again within two years.

The homeowner can choose a Deed in Lieu of Foreclosure, which means they sign the house back to the bank. This is only an option however, if the bank wants the house back. In a declining market, lenders are more apt to suggest sellers find an agent and consider a short sale.

The homeowner can reinstate their mortgage by coming up with all of the past due monies, interests, penalties and fines. Obviously, that is not an option for most consumers in this position.

The homeowner can try what is called a Forbearance Agreement. In other words, they then take what is owed and move it to the back of the loan and start all over. This would depend largely on their credit, their payment history, how long the lender has carried the loan and if they feel comfortable enough with that particular homeowner to take the risk.
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