Other alternatives to foreclosure

Previous posts on this blog have discussed how a short sale can help a family in San Jose or one of the other suburbs in the Bay Area avoid losing their home, or other property, to the process commonly referred to as foreclosure.

While a short sale is one option, there are other things a family can do if they find themselves unable to pay their mortgage, short of simply allowing their lender to foreclose.

For instance, especially early on, the bank may be willing either to agree to forbear on payments or to modify the terms of the loan itself. The two processes are slightly different.

In the first case, the person will continue to owe what they owe on the loan and on the same terms, but the bank will just either give the person time to catch up on the back payments or, possibly, be willing to overlook a few missed payments.

In the second case, the bank will actually change the terms of the loan in order to work the overdue payments in to the overall balance of the loan. A modification could involve changing the interest rate on the loan as well as the term of the loan.

Usually, even the most consumer-friendly banks are going to want some documentation showing that, if offered one of these options, a debtor will be able ultimately to make good on his or her loan. Many banks even have defined criteria as to who is or is not eligible for these options. As such, a person will need to put his or her best foot forward when applying for one of these options while of course remaining honest and candid. An experienced real estate attorney can answer detailed questions about these options.

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