Many homeowners facing foreclosure believe that Bush's new "Project Lifeline" will be able to help them save their homes. Well, the truth of the matter is that Project Lifeline is only eligible for certain types of homeowners, mainly those who have never filed bankruptcy and have adjustable-rate mortgages. And even then the program just places a temporary freeze on the problem. It doesn't really give a prominent solution for preventing foreclosure, because once the freeze is up, the borrower is still expected to find a way to catch up on their payments.
So, instead of expecting a miracle from Project Lifeline, homeowners need to consider other pre-foreclosure options.
One of the first options a homeowner can use to prevent foreclosure is selling their property. By selling their property, they can pay off their existing mortgage(s), prevent foreclosure and retain their credit score. If they find they have trouble trying to sell their homes, they can consider trying to arrange a short sale with their lender and an investor. They won't retain any profit from a short sale, but they will avoid foreclosure and subsequently save their credit score.
The next pre-foreclosure option is utilizing a forbearance agreement. A forbearance agreement is when a mortgage company foregoes their legal right to foreclose, provided that the borrower follows the terms of the agreement. This usually means paying an upfront payment, and paying higher monthly payments to help cover the arrears amount. Forbearance agreements last no longer than year, after which the mortgage company will return to their original financing arrangement. Forbearance agreements can be an excellent alternative for homeowners who expect an eventual improvement in their finances. Otherwise, forbearance agreements can cause more problems, since it accelerates a lender's right to foreclose even if the borrower is just a month late.
Thirdly, there's Chapter 13 bankruptcy. This option is only useful if a borrower has other debt that is putting them at risk for lawsuits or wage garnishments. And even then Chapter 13 bankruptcy will require a person to have to pay their debt back. But it will prevent foreclosure at least temporarily. The borrower will still have to find a way to pay subsequent mortgage payments, along with whatever is agreed to in the bankruptcy arrangement. If this poses a problem, borrowers can consider liquidating everything through a Chapter 7 bankruptcy. With Chapter 7 bankruptcy, they will lose their house, but they will be able to start over debt free.
Then there's the final option: trying to get help from a foreclosure specialist. Foreclosure specialists make negotiations with lenders in hopes that payment arrangements, short sales, etc. can be properly arranged on your behalf. Foreclosure specialists can also help get you in touch with mortgage companies that might be willing to refinance your debt, allowing you an opportunity to start fresh with a new loan.
Either way, with a foreclosure specialist, you have a professional that knows how to talk the appropriate lingo needed to get even the most stringent mortgage company to budge. This can be very difficult to do by yourself, which is why you should consider getting in touch with one before it is too late.
