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Alternatives to Foreclosure

When a lender is looking at a solution for a defaulted loan, there is a range of solutions ranging from a simple repayment plan all the way down to completing the foreclosure action. The options are listed below in the order most lenders will prefer to workout a defaulted loan with the repayment plan being the preferred, most used option.
Repayment Plan

A formal or informal plan to re-pay the lender all of the past due amounts and fees over a period of time. This type of workout will usually require a downpayment, then monthly payments along with your regular monthly payment.
Forbearance

The lender has the capability to reduce or suspend payments for a period of time allowing you to recover from a financial setback.
Loan Modification

Designed to resolve default for longer term financial problems, this could include reduction of the loan interest rate, or reducing payments.
Loan Assumption

If the loan cannot be brought current and kept current, the payments on some loans can be assumed by a new borrower.
Pre-Foreclosure Sale

Sale of the property before the foreclosure can be completed. If proceeds from the sale aren't enough to fully repay the loan, this is often referred to as a "Short Sale".
Deed In Lieu of Foreclosure

This is the least preferred of all the options, and often not acceptable to the lender due to title issues or the presence of other loans against the property.
Workout Documentation . ( The documents necessary for a successful workout.)
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Homeowner Alternatives to Foreclosure - Documents needed

A successful workout to keep the property is dependent on the lender being able to determine that the homeowner suffered a financial hardship and will have the financial capability to be able to keep the loan current. A successful workout involving a pre-foreclosure sale or Deed In Lieu of Foreclosure will be dependent on the lender being able to determine there was a financial hardship and that foreclosure is inevitable. Most lenders will require the following documents as the minimum for considering a loan workout, and many lenders will not consider a workout until the loan has been delinquent for at least 90 days. Answers to common questions about foreclosure can be found in our Foreclosures Discussion forum.
Hardship Letter

This letter describes the hardship that caused the loan to go into default and describes your preferred solution to bring the loan current. The hardship should be involuntary, such as divorce, job layoff or medical reasons. This letter will also include your proposal for a workout and the reason you are confident the workout plan will succeed.
Paystubs

One or two current paystubs from each person occupying the property who is contributing to the payment of household expenses. The lender will use this to determine the feasibility of any repayment plan, or to determine foreclosure is inevitable.
Tax Returns

Self employed borrowers will need to provide the last two years tax returns along with a current profit and loss statement. Many self employed borrowers don't receive paystubs, the lender will use the tax returns to determine income levels.
Financial Statement

A statement outlining all of your income, assets and liabilities. This statement provides a "snapshot" of your financial situation allowing the lender to determine the economic hardship can be overcome.


One key thing to remember if you are attempting to complete a workout without outside assistance is to submit ALL of your paperwork together as a package and be sure to keep copies of everything. Your lender needs all of the information to be able to make a determination of which type of workout may be appropriate.

If you would like more information on the Foreclosure or Short Sale option for your Mammoth Property please click the link below.

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