The day of the trustee sale the property goes up for public auction at the courthouse steps and is sold to the highest bidder- either the lender or an investor will buy it at the sale, and the property is foreclosed on.
A lot of homeowners become paralyzed when facing foreclosure- this is understandable. It is so stressful!!!!!! It is important to not be overwhelmed because there are many potential alternatives to foreclosure, and getting foreclosed on is almost always your worst option.
Stay in Your Home
A loan modification is a great solution if you are making income but can’t afford your current payment. The government has mandated banks to create loan modification programs. A loan modification may reduce your interest rate, extend the term of the loan to 40 years, or reduce the principal balance. Find out more about loan modifications at the government’s website: Making Home Affordable http://www.makinghomeaffordable.gov/pages/default.aspx
A refinance is a good option if you have equity in your home and you are making income but can’t afford your current payment. The disadvantage with refinancing is that you will have to qualify for the new loan as well as pay the loan origination fees. However if you do qualify for a refinance, the new loan will have a lower interest rate which means lower monthly payments.
A forbearance is a good option if you have a short term hardship that prevents you from making your mortgage payments for a few months, after which, you will be able to resume normal payments. A forbearance basically puts your loan on “hold” for a few months.
Reinstatement or Repayment
If you can afford to come up with the cash to bring the mortgage current, including all past due payments plus penalties, the lender will reinstate the loan. Lenders offer repayment plans that allows the borrower to make larger than normal monthly payments on a schedule until the borrower is caught up instead of paying it at once in a lump sum.
Rent the Property
If you have somewhere else to go and the rental income from renting the property will cover the expenses, then one way to hold the property is to rent it out and wait for the market to get better.
Bankruptcy, Chapter 13 or Chapter 7
Bankruptcy temporarily stops foreclosure with an “automatic stay”. In Chapter 13, a 3-5 year payment plan is worked out to pay back debts. If you dot not stick to the new payment plan you will still lose your home. Chapter 7 liquidates all of your assets to pay debts. It also will not stop foreclosure, but the stay can buy you time, and the bankruptcy might wipe some other unsecured debts which might allow you to afford your home again. Speak with a bankruptcy attorney.
Servicemembers Civil Relief Act (SCRA)
SCRA is for military personnel that have been activated for duty, and are having difficulty making their mortgage payments at home while they are away.
Leave Your Home
Short sale means to sell your home even though it is underwater. In a short sale, the lender accepts a sale price that is less than the loan amount and does not seek a deficiency judgment against you.
Deed in Lieu of Foreclosure
An alternative short sale, instead of selling the property, you hand over the property to the bank first before they do a foreclosure.
Which Option is Best?
It depends on your situation. Consult with a realtor, attorney, credit advisor, and accountant to figure out which option will be best.