Home foreclosure is perhaps one of the worst things a person can endure. Not only do homeowners lose the roof over their head they also experience severe financial consequences. In addition to reducing credit scores, some banks hold borrowers responsible for deficiency amounts when repossessed property sells for less than the balance owed on the loan.

To avoid home foreclosure, borrowers must research all available options including working directly with their lender to hiring a foreclosure mediator. One program distressed homeowners are turning to is Making Home Affordable.

This government sponsored program offers a variety of home saving options including loan modifications, mortgage refinance, and foreclosure alternatives including real estate short sales and deed in lieu of foreclosure.

When homeowners can no longer afford mortgage payments they may qualify for Making Home Affordable \’Exit Gracefully\’ program. Depending on the circumstances, banks can either let homeowners list their property for sale at a reduced price or give the house back to the bank. MHA offers up to $3000 in relocation assistance money to qualified homeowners.

When homeowners obtain help through Making Home Affordable they are not held responsible for deficiency amounts between loan balances and sale prices. If borrowers work directly with lenders they may be responsible for deficiency amounts, so it is crucial to understand lender policies before entering into contract.

If homeowners do not have adequate funds to pay deficiency amounts, mortgage lenders can obtain judgments for outstanding balances. Creditor judgments are reported to credit bureaus for up to 7 years after the debt has been fully repaid.

Judgments can reduce FICO scores and place borrowers into bad credit categories. Having bad credit prevents people from qualifying for credit or causes them to pay substantially higher rates of interest. It can take several years to recover from the financial effects of foreclosure and deficiency judgments.

Homeowners who want to prevent foreclosure must be highly proactive in contacting their mortgage service provider. Once home loans become delinquent the account is turned over to a bank loss mitigator. The role of loss mitigators is to minimize financial losses while helping homeowners enter into plans that allow them to remain in their home.

Homeowners are required to provide financial documents to loss mitigators to assist them in determining which program is best suited for their needs. Those facing temporary financial problems might qualify for deferred payments which grant them a few months to get back on track.

Another option is that of real estate forbearance. These plans are used to temporarily reduce or suspend mortgage payments. Once forbearance plans expire, borrowers must remit the full amount of missed or reduced payments.

One consideration of forbearance agreements is if mortgage insurance or real estate taxes become due while the agreement is effective, borrowers must remit these payments out-of-pocket if they do not have sufficient funds in escrow.

Loan modification is a good choice for those who require reduced loan installments. Under Making Home Affordable, borrowers enter into a trial modification for 3 months. If they remain in compliance the loan is permanently modified. On average, borrowers who qualify for MHA loan modification reduce monthly installments by $500.

Mortgage refinance can be a good option for homeowners who qualify for a new loan. In order to refinance, borrowers take out a new loan that offers a reduced interest rate. However, borrowers are responsible for closing costs typically associated with taking out real estate loans.

Regardless of the method chosen, homeowners must be proactive in providing required documents and following up with lenders to ensure the process is completed. Homeowners that take action early have more options to prevent home foreclosure than those who wait until the bank provides a notice of default.

Author Bio: Author and real estate investor, Simon Volkov offers home foreclosure prevention tips, along with information about Making Home Affordable programs via his real estate foreclosure article library published at www.SimonVolkov.com.

Category: Real Estate
Keywords: home foreclosure, making home affordable, deed in lieu, loan modification, mortgage refinance