Short Sale

• If you find yourself facing or involved in a foreclosure, you could pursue a short sale, which involves putting real estate onto the market for below its appraised value. The goal of a short sale is finding a buyer who will purchase the property at a price that will cover the balance due on the mortgage.
  
  In order make a property appealing to a buyer, you need to sell at the lowest possible price. Therefore, the foundation of any short sale is negotiating with the lender to reduce or discount the balance owed on the mortgage.
  
  Many lenders are willing to consider such a proposal because the losses sustained through discounting or lowering the balance may be less than pursuing foreclosure. The costs of a foreclosure action--attorney fees and other costs--are significant.
  
  

Loan Modification

• Another strategy to stop a foreclosure is loan modification. The Obama Administration established a variety of incentives designed to encourage lenders and borrowers to attempt loan modifications in lieu of foreclosure. These include the availability of so-called TARP funds payable to lenders to encourage loan modifications.
  
  Through the loan modification process, the lender agrees to a new set of loan terms and conditions that are designed to make it easier for a borrower to satisfy the outstanding home mortgage obligation. A common loan modification strategy is to reduce the monthly payment and extend the period of time over which the loan balance must be satisfied.
  
  

Loan Refinancing

• Loan refinancing involves the lender replacing the outstanding loan with a new home mortgage. A common loan refinancing scheme involves replacement of an adjustable rate mortgage (ARM) with a fixed rate mortgage. One of the common problems with ARMs is the initial interest rate may be affordable, but when the interest rates on ARMs shot up dramatically, this caused financial problems for consumers who obtained such loans and lead to a default on the mortgage.
  
  

Mortgage Foreclosure Loan

• Mortgage foreclosure loans are available from a limited number of lenders. These loans are no longer widely available and come with a higher interest rate than what a borrower likely experienced with a more traditional type of home mortgage.
  
  Despite these concerns, a mortgage foreclosure loan is an appropriate vehicle for some to avoid foreclosure. A mortgage foreclosure loan is a type of replacement financing in which a new lender steps in, pays off the balance on the loan and negotiates a new loan with the property owner.
  
  The primary benefit of this type of financing is that many people with properties in foreclosure have accumulated fees, penalty charges and other costs that have become insurmountable. These expenses are paid off by the new lender and incorporated into the mortgage foreclosure loan, allowing these expenses to be paid off over time as part of the new loan payments.