Foreclosure: Options for the Homeowner

Losing a home, by foreclosure, is one of the most tragic financial situations a homeowner can experience. Establishing residency and owning a piece of residential property is a life goal many Americans dream of. Establishing satisfactory creditworthiness through timely mortgage payments will significantly add value to many other aspects of a homeowner's financial future and financial portfolio. However, for many Americans, the prospect of losing a home, due to foreclosure, is an often frightening financial nightmare. Understanding the process of home foreclosure and viable options and alternatives available as a homeowner, may ensure the home is secure and remains in the possession of the homeowner.

When mortgage payments are delinquent, the mortgage lender has an opportunity to begin a process known as home foreclosure. Foreclosure involves the legal proceedings, by a mortgage lender, to take over the ownership of a home for which money was loaned for purchase. In home foreclosure, when the final proceeding has taken place, the home ownership is transferred to the mortgage lender at which point the homeowner will be required to vacate the property. Unfortunately, in situations where the mortgage loan is greater than the value of the home, the mortgage lender may further complicate the homeowner's financial situation by placing judgment for the difference between the amount the home is worth and the amount of the foreclosed loan balance.

To avert a home foreclosure, homeowner's are provided a variety of financial options. Such options might include forbearance of the mortgage payment in which the mortgage company may defer the principal mortgage payment, requiring only the escrow payment be made for a specific number of months. In this situation, the monthly mortgage principal payment may be deferred from one to six months, depending on the lender. The disadvantage to mortgage forbearance payment plans lies in the continued accrual of interest on the total mortgage principal balance. However, the advantage to deferred mortgage payments is the capacity to allow for the homeowner to save extra money, over a few months, to begin making full mortgage payments again.

Another alternative to home foreclosure may lie in the opportunity to modify the home mortgage re-payment plan through a home mortgage refinancing option or simply a home mortgage modification through the mortgage lender. By applying for mortgage modification, the amount of the monthly principal payment may be reduced however the mortgage loan terms may be extended so as to allow for continued and full repayment of the mortgage principal balance. Unfortunately, this option does result in additional interest paid over the life of the home mortgage however, the homeowner will retain ownership.

Another option to home foreclosure may be the opportunity to pursue a home equity line of credit, also known as a HELOC. Generally, HELOC approvals are granted when the mortgage payment is current and provides for a loan against the equity balance on the home. While time consuming, the HELOC offers an advantage to utilize extra cash to keep mortgage payments current while also, possibly, utilizing extra cash to make home repairs or pay additional debts in an effort to balance the homeowner's debt to income ratio. Home equity lines of credit are recommended to the homeowner who may foresee a possibility of becoming delinquent on the home mortgage payment in the near future.

Options in lieu of home foreclosure are available. As a homeowner, do not ignore the notices from the mortgage lender and always work to maintain open lines of communication. When facing a financial crisis, consider discussing financing options with the mortgage lender and avoid vacating the property until there is no other feasible option available. By doing so, as a homeowner, ownership of your residence will remain in your hands and under your control.