The number of homes in foreclosure has reached unprecedented levels; encompassing nearly 11 million properties by the end of 2010. No one wants to have the bank repossess their home, but in some cases it is the only option. In order to avoid becoming a statistic, borrowers must be proactive the moment they realize they cannot meet loan obligations.

Homes in foreclosure have far-reaching effects. Homeowners lose all monies vested into the property and incur serious credit damage. Banks sustain losses from the foreclosure process and loan default. Neighbors experience declining property values. Communities lose much needed property taxes used for infrastructure, emergency services, and education.

When property values decline, property owners can end up owing more on their home loan than their home is worth. Borrowers who are upside-down on their loan cannot qualify for loan modifications or mortgage refinance. When borrowers cannot obtain mortgage relief they can be forced into personal bankruptcy or lose their home to foreclosure.

The pressure of foreclosure has caused many desperate homeowners to walk away from their home. Home abandonment only leads to additional financial burdens. Mortgage lenders can persue mortgagors for foreclosure costs, legal fees, and monetary deficiencies against the home loan.

Foreclosure prevention strategies are available, but borrowers should be unrelenting in communicating with their lender. When borrowers become delinquent with loan payments their account is given to a bank loss mitigator. These employees work with borrowers to devise a plan to save their home. The sooner communication begins the better chance of a successful outcome.

Banks can commence with foreclosure action once loan payments are 31 days past due. Most banks prefer to avoid foreclosure and give borrowers time to work out a plan. When mortgagors are able to become current with payments quickly, the loan is restored and no further action is required.

If borrowers need time to pay past due amounts, banks can offer loan deferment, mortgage forbearance, or loan modification. Loan deferment allows borrowers to skip 1 to 3 payments by rolling them to the end of the loan. Mortgage forbearance can alter interest amounts, principal payments, or suspend payments for up to one year. Loan modification permanently alters loan terms through a reduced interest rate or extended payments.

When borrowers are in financial crisis and cannot afford future loan payments, banks can offer real estate short sale or deed in lieu of foreclosure. Both of these options are subject to borrowers being held responsible for loan deficiencies. It is important to negotiate a payment in full agreement when entering into short sales or deed in lieu contracts.

Short sale means the property is sold ‘short’ of the amount owed on the mortgage note. Specific protocol must be followed and properties must qualify. The short sale process is complicated. Most people find working with a real estate lawyer or short sale specialist provides a better outcome.

Deed in lieu of foreclosure requires borrowers to give their home back to the bank. Deed in lieu can occur quickly, so borrowers must be prepared to vacate the premises immediately after contracts are signed.

The Department of Housing and Urban Development provides low- and no-cost housing counseling to individuals in need of foreclosure assistance via their website at HUD.gov. It is wise to research all available options and associated financial consequences.

Author Bio: Real estate investor, Simon Volkov provides a wide range of foreclosure articles via his website at www.SimonVolkov.com. Topics include: homes in foreclosure, foreclosure prevention, mortgage relief, short sale real estate, and much more.

Category: Finances
Keywords: homes in foreclosure,avoid foreclosure,deed in lieu of foreclosure,real estate short sale