Options for homeowners...brief descriptions

Forbearance: under a forbearance agreement, your lender may permit you to reduce or suspend your mortgage payments for a short period of time. Then, typically, at the end of the forbearace period, you will beging making your regular payments PLUS an additional amount as negotiated between you and your lender until you are 'caught up'. A forbearance agreement will only work for you if you expect your current financial difficulties to last a short time.

Loan Modification: If you are behind on your mortgage payment and can not afford to bring them current and a forbearance agreement will not work with your situation a loan modification is an option. In a loan mod, your lender permanently alters the terms and conditions of your loan in an effort to make your payment more affordable. You have, no doubt, heard or read about the failure of the govt promoted loan mod program, HAMP. Loan mods are very difficult to get approved for a number of reasons and work out for only a very small percentage of homeowners.

Deed-in-lieu of foreclosure: If you are unable to do eother of the 2 prior options, your lender may agree to a voluntary transfer of your property back to them. Some people feel that this is a better option than an actual foreclosure...but a short sale is almost always a better option than a deed-in-lieu.

Short Sale: If you can no longer afford your mortgage payments and your home is worth less than your mortgage balance a short sale may be your best option. In a short sale you negotiate generally three things with your lender; 1) The approval of your hardship and thier willingness to entertain a short payoff, 2) how the short sale will be reported to the credit bureaus, and , most importantly 3) the treatment of how the defeciency will be handled.

With a short sale, you will be able to become a homeowner again well before you could with a foreclosure or deed-in-lieu on your credit report. And the impact on your credit score has been reported to be much less.

Also, if your lender forgives any deficiency under the terms of your negotiated short sale, the Mortgage Forgivness Debt Relief Act of 2007 may relieve you of any tax libilities for the forgiven debt....check with your tax advisor on this.