Foreclosure Alternatives / Stopping Foreclosure in Maryland and D.C.

September 18, 2008

As the credit crisis continues, many homeowners need help avoiding or stopping foreclosure. Some options are discussed below.

Note: Many of the alternatives described below appear very similar. But, different options can have very different affects on a consumer’s credit report and score. A consumer should carefully research the effect a proposed solution would have on his or her credit report and score before exercising any of these options.

Bankruptcy. Many consumers still qualify for bankruptcy. Under certain circumstances, bankruptcy can help a homeowner avoid foreclosure (although the bankruptcy court’s ability to modify residential mortgages is limited.)

Sale of Residence. While it isn’t anyone’s first choice, it might be better for a consumer to sell his or her home if a foreclosure is unavoidable.

Refinance. Lending criteria have become more strict, but many people can still qualify to refinance their mortgages.

Forbearance Agreement. If a consumer is unable to make loan payments, his or her lender might agree to grant a forbearance. A forbearance agreement sets forth a formal repayment plan that stops a pending foreclosure for a certain period of time while the consumer attempts to regain his or her ability to make payments.

Repayment Plan. If a consumer’s mortgage is past due because of a temporary financial setback, his or her lender may be willing to work out a Repayment Plan. Under a Repayment Plan, the homeowner usually must be able to make the monthly loan payment and pay an additional amount towards the past due amount each month until the loan is brought current.

Mortgage Modification Agreement. Under some circumstances, lenders may be willing to re-negotiate the terms of the mortgage and / or forgive a certain percentage of past due amounts.

Short Sale. If a consumer wants to sell his or her property, but the net proceeds from a sale is not enough to pay off the mortgage, the lender may allow the consumer to sell the property without paying the entire amount due.

Deed In Lieu of Foreclosure. This might be an option when a consumer has no other alternatives and there are no additional liens (other than the primary mortgage) against the property. The consumer avoids a foreclosure by deeding the property directly to the mortgage lender.