Jim Waugh, CRS



1 Short Sale

A short sale allows the homeowner to avoid foreclosure,

minimize financial damage and move on from a

burdensome, unaffordable mortgage. In many cases,

a short sale allows the borrower to qualify for a new

mortgage in just 24 months, as opposed to five years or

more after a foreclosure.

A trained real estate agent can negotiate a short sale

with your lender if you have three qualifications. First, you

must show some type of financial hardship. Second, you

must have a monthly shortfall, meaning your monthly

expenses are greater than your monthly income. Finally,

you need to prove that your debts are greater than the

value of your assets (certain investments, property, etc.).

2 Reinstatement

A reinstatement is the simplest solution for a foreclosure,

however it is often the most difficult for homeowners

to achieve. The homeowner simply pays the total

amount past due (including late fees) to the lender.

This solution does not require the lender’s approval and

will “reinstate” a mortgage up to the day before the

foreclosure sale.

3 Forbearance or Repayment Plan

A forbearance or repayment plan involves negotiating

with the mortgage company to allow the homeower

to repay back-payments over a period of time.

The homeowner typically makes current mortgage

payments in addition to a portion of the back-payments

owed. This option requires lender approval.

4 Mortgage Modification

A mortgage modification involves the reduction of

one of the following: the interest rate on the loan, the

principal balance of the loan, the term of the loan, or

any combination of these. These changes require lender

approval and typically result in a lower payment for the

homeowner and a more affordable mortgage.

5 Rent the Property

This option does not require lender approval, but does

require the homeowner’s ability to rent the house

for enough money to cover the monthly mortgage


It is important to remember that there may be

unexpected costs associated with the maintenance

of a rental property in addition to the monthly

mortgage payments. Homeowners should take this into

consideration when deciding whether this option will work

for them.

6 Deed-in-Lieu of Foreclosure

Also known as a “friendly foreclosure,” a deed-in-lieu

allows the homeowner to return the property to the

lender rather than go through the foreclosure process.

Lender approval is required for this option, and the

homeowner must also vacate the property. Deed-in-lieu

can potentially lessen the damage to a credit score

and future loan eligibility, and sometimes the lender

will forgo their right to pursue a deficiency judgment,

meaning the homeowner will not be responsible for

further payments.

7 Bankruptcy

Many have considered and marketed bankruptcy as a

“foreclosure solution,” but this is only true in some states

and situations. This does not require lender approval,

but you must have non-mortgage debts that you claim

as a hardship.

Entering bankruptcy can be a risky and costly process.

Be sure to seek the advice of a qualified bankruptcy

attorney when pursuing this as an option.

8 Refinance

As opposed to mortgage modification, refinancing

means you will be acquiring a new loan based on your

current credit standing. If you have already missed

mortgage payments, your credit score may make it

difficult to find a loan with cheaper payments.

9 Servicemembers Civil Relief Act

(military personnel only)

If a member of the military is experiencing financial

distress due to deployment—and that person can show

that the debt was entered into prior to deployment—he

or she may qualify for relief under the Servicemembers

Civil Relief Act. The American Bar Association has a

network of attorneys that will work with servicemembers

to help qualify them for this relief.

10 Sell the Property

Homeowners with sufficient equity can list their property

with a qualified agent who understands the foreclosure

process in their area. Unfortunately, many homeowners

in today’s market have experienced a decline in home

value and may owe more than what the home is worth.

/Photos/120x/14003.jpg Jim Waugh, CRS
Office: 303-980-7825
Direct: 303-888-7481
Cell: 303-888-7481
Fax: 303-987-3463
8500 W. Bowles Ave.#100
Littleton, CO 80123

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