Looking for Alternatives to Foreclosure? Here Are Five.

While some states allow lenders to foreclose on a property without having to go to court, Florida is not one of them. If your lender wants to foreclose on your home in Florida, they must file a lawsuit to do so.

Following the housing market crisis, lenders became more incentivized to find ways to help homeowners avoid foreclosure. This is not only because they had more properties on their books than they wanted, but also because state and federal governments passed laws requiring lenders to work better with homeowners to avoid foreclosure.

Today, some of the most common alternatives to foreclosure in Florida include:

Loan Modification – If both the lender and borrower can agree to change the terms of the original note, then a loan modification can be a useful tool to preventing foreclosure. The lender must weigh the financial benefits of a loan modification vs. the losses that will be incurred in the process.

Forbearance – If a borrower has had a temporary loss of income that has been or will be remedied in the near future, a lender may consider a forbearance plan in lieu of foreclosure.

Reinstatement – When a debtor is able to bring their mortgage to current status, this is a win-win for both the lender and the mortgage holder.

Deed-in-lieu of foreclosure – This process entails the borrower turning the deed for the property over to the lender to avoid having a foreclosure on their credit history. The benefit for a lender is the avoidance of a potentially costly and lengthy foreclosure process. However, lenders typically shy away from this tactic if junior liens are attached, since it would force them to negotiate those liens with the holders.

Short sale – This alternative has been employed more since the housing market crisis as property values dropped and borrowers found themselves underwater on their mortgages. In a short sale, the lender agrees to accept less than what is due and the borrower walks away without a foreclosure on his or her credit history.

Whatever alternatives to foreclosure best fit your circumstances, the assistance of an experienced real estate attorney is essential to understanding the process.