Stop Foreclosure HUD using Alternatives to Loan Modification

You can still stop foreclosure HUD even if you have been rejected or are not qualified for loan modification under the Obama administration’s foreclosure prevention program.

You can choose from alternative foreclosure prevention options that several lenders have approved as valid loss mitigation options. When a borrower becomes delinquent for three months or more, the bank faces loan loss, including the costs of foreclosure if it becomes the only option to recover loan loss.

But if the borrower works with the bank to prevent foreclosure, the lender looks at the suggested alternative option and if it sees that it reduces costs and that the borrower is able to carry it out, the bank will approve it.

Loan modification under the Making Home Affordable program has been one of the most helpful foreclosure prevention strategies, but if you are not qualified, you have to consider the other options.

One of the alternative options is advance claim from the mortgage insurer. The insurer pays all the unpaid monthly loan payments including penalties, interests and fees to restore the home loan to current status. The borrower in turn signs a promissory note promising to pay the insurer the advance claim over a certain period of time.

Another alternative option to stop foreclosure HUD is a forbearance plan. This plan is approved if the borrower suffered only a temporary loss or reduction of income and he can show proofs that his income will be restored and will increase within a period of six to 18 months. The lender will reduce the monthly payments temporarily and then collect the missed payments and the balance of the reduced payments when the borrower’s financial status has improved.

The third option is pre-foreclosure sale or short sale. The borrower loses the house but avoids the difficulties of foreclosure and prevents his credit record from being destroyed by a foreclosure record. Typically, the lender gives the borrower a certain period of time to sell the house at a certain price level. The borrower must make sure that the lender accepts the expected sales price as complete payment of the home loan.

Voluntary conveyance of property rights to the lender is the fourth option. The borrower voluntarily gives back the property to the lender so the lender does not need to file a foreclosure suit. This option is oftentimes called deed in lieu of foreclosure.

Whichever of these alternative options you have chosen as an option to stop foreclosure HUD, bear in mind that you can recover with perseverance, better money management and frugal living.