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Avoiding Foreclosure-The Pros And Cons Of The Foreclosure Avoidance Programs Offered


Foreclosure is not something that most people ever think is going to happen to them. But when it does, when the bank wants the house back, it can be a terrible experience. Hang in there though and remember that it is not yet over.

Just because you have received notification that the foreclosure process has begun does not mean that you do not have enough time to pull yourself from the foreclosure and save your credit and your finances.

Just as with anything else in life, there are good things and bad things about every situation, deal, or offer out there. In order to make sure that you are making the right decision for yourself, your family, and your credit, it is important to make sure that you are weighing out all of the factors.

By doing this, you will know at the end of the day that you made the right decision and there will be nothing to regret. Foreclosure is of course no laughing matter and it is something that confuses and scares many people. Because of this, many people will simply walk away or take the first offer or assistance program that they are offered.

Walking away is never the best thing to do and in some cases, people can find themselves worse off than they thought they were going to be simply because they did not educate themselves on the various things involved with the process of the programs.

Not all lenders and their employees will take the time to walk you through all of the pros and cons for each of the programs or assistance they offer. But you can make sure that you understand the pros and cons of it all so that you are making the right decision.

Repayment Plan

The repayment plan is great for those who have no other choice, feel the need to pay everything back on their own, and who have extra money left after they pay their bills every month. The great thing about the repayment plan is that it offers a slow and steady way to bring the account back up to date.

Also, once the first payment is made on the repayment plan, the foreclosure process is stopped right then and there. The problem with the repayment plan is that many people tend to fall off them because they simply do not have the income to support it. Even if they thought they did, unexpected expenses and bills that they forgot about can come up at any moment.

The longer the plan is stretched out for, the more likely it is that the plan is going to fall apart. Depending on where the account is when the plan breaks, foreclosure action could start again. Also, each month there will still be hits to the credit report.

Loan Modification

The loan modification is a great way to bring the account up to date right away. The loan is reworked and there is a good chance that a lower interest rate can be given. Any foreclosure process that was started will be stopped once the loan modification is approved and the borrower can simply begin paying the monthly payments.

There will no longer be worrying over past due payments. There is a down side to the loan modification process though. If you are used to paying your taxes and homeowners insurance every year out of your income tax refund you may be in for a surprise.

Generally, when the loan modification is approved, the taxes and insurance will be escrowed into the payments, which increase the amount due each month. For some people this is a great thing. For others, it may increase their monthly payment to something that they cannot afford.

Also, it is important to know that many lenders only permit a certain number of loan modifications for the entire life of the loan. This means that you only have so many chances at obtaining that type of help so make sure that you are only using it when you have to.

Forbearance

The forbearance is something that a lot of borrowers will call into their lenders to ask about. Many are finding that lenders are not offering this type of assistance as they may have used to in the past. While it is great to not have to worry about any collection efforts or foreclosure action for an agreed upon time frame it is not always the best option.

Lenders are finding that the approval of forbearance generally does more bad then good for the borrower. In rare cases, the forbearance plan works great. These cases would be when there is a guaranteed date that the borrower is going to have a large amount of money coming in to pay the account current.

The problem is that if there is not a set amount of money coming in, the collection efforts pick back up at the end of the forbearance period. This means that foreclosure could start right away and the borrower is now left with being six or eight payments past due with no way to get out of it.

Short Sale


The benefits of the short sale include getting out of the foreclosure process, getting a slightly better credit report rating, and not being responsible for an incredible amount of money. Generally, the lenders will not go after the borrower for the difference of what was owed and what the house sold for.

If the borrower has money in the bank or owns several other properties, there is a chance that the lender could look into placing a lien on a property of the borrower's until the debt is completely paid off.

Deed In Lieu

The positive side to the deed in lieu is that the foreclosure never fully completes itself and the mark on the credit report is a little better than that of the foreclosure. The problem with this is that the lender generally wants the borrower to list the home for sale, which can tie up a lot of time.

The deed in lieu is also not something lenders like to do since they are not in business with the desire to own a lot of homes. They simply want the interest collected from the borrowers.

All in all, there are good points and bad points to all of the various options that are available for borrowers. What is good for one person may not be good for another. It is important to make sure that you are taking your specific situation and using that as the guideline as to what you should and should not be doing.

While listening to advice from friends and family is nice, their situation and their bills are probably not the same as yours. Think everything through and you will come out with the solution that is right for you.