Mortgage foreclosure rates are expected to reach an all-time high by the end of 2010 and may carry over into the second quarter of 2011. Although foreclosure has practically become an epidemic in the U.S., options still exist to help mortgagors avoid losing their home.

Common mortgage foreclosure options include: loan modification, mortgage refinance, real estate forbearance, short sale agreements, and deed in lieu of foreclosure. Each strategy has a unique set of pros and cons, so homeowners must conduct research and carefully weigh their options.

President Obama’s Making Home Affordable program was initiated to help borrowers obtain loan modifications or mortgage refinance to reduce monthly loan installments. Although this program has ended, banks continue to offer the aforementioned strategies to qualified borrowers.

Mortgagors experiencing temporary financial problems may qualify for a loan modification if they are capable of curing mortgage arrears within a few months. Banks offer different strategies based on borrowers income and amount of past due payments.

Lenders can temporarily suspend or reduce payments or lower interest rates to allow borrowers time to get back on track. Some banks roll past due payments to the end of the loan and extend payment terms. Others require borrowers to make partial payments during the modification period. The only way to know which option is available is to contact the servicing lender.

When mortgagors enter into mortgage refinance they are required to take out a new loan and pay off existing mortgages. Borrowers with bad credit may not qualify for refinancing due to stricter lending criteria.

Real estate forbearance can be a good foreclosure prevention strategy for borrowers who have fallen behind with mortgage payments. Mortgage forbearance is usually only offered to mortgagors capable of curing mortgage arrears within a short period of time.

With real estate forbearance, borrowers must pay their regular loan payments and provide additional funds which are contributed toward past due payments. Lenders are prohibited from initiating foreclosure action when forbearance agreements are in place unless borrowers default on the agreement. Mortgage forbearance plans usually last between three and six months.

Short sale real estate contracts allow borrowers to sell their home for less than owed on the mortgage loan. In order to obtain short sale approval borrowers must undergo a complex and lengthy process and provide evidence they are financially insolvent.

Short sales are handled by bank loss mitigation and often require the assistance of a real estate lawyer or short sale mediator. It is estimated banks accept less than 20-percent of short sale requests. Working with a professional experienced in orchestrating short sale transactions can improve chances of approval ten-fold.

The last option for borrowers facing mortgage foreclosure is usually deed in lieu of foreclosure. This option does not allow borrowers to remain in their home, but might reduce the level of credit damage. Much depends on how banks handle deed in lieu.

Using deed in lieu contracts, borrowers return their property to the bank. Some banks accept the property as payment in full toward satisfying the loan balance. This is the preferred method and the strategy borrowers should seek to obtain.

Many lenders issue deficiency judgments and hold mortgagors responsible for any difference between the loan balance and sale price of the home. This can amount to thousands of dollars and has the potential to destroy borrowers’ credit for years to come. Unfortunately, deficiency judgments can be issued against foreclosure, short sale, and deed in lieu agreements, so borrowers must take time to understand the process used by their lender.

Individuals seeking foreclosure prevention options should visit the Department of Housing and Urban Development website at HUD.gov. Borrowers can obtain a list of housing counselors which offer low- or no-cost counseling to help homeowners determine which foreclosure programs are available and which best suit their needs.

Author Bio: Real estate investor, Simon Volkov shares additional mortgage foreclosure strategies and resources to help mortgagors make informed choices. Simon has helped hundreds of distressed homeowners prevent foreclosure and obtain short sale approval. Learn more at www.SimonVolkov.com.

Category: Real Estate
Keywords: mortgage foreclosure,loan modification, mortgage refinance,deed in lieu of foreclosure,mortgage refi