Avoid Foreclosure

The recent downturn in the housing market and national financial recession has caused many American families undue stress and threat of foreclosure. There are options to you so that you can avoid foreclosure. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. There are several options available to Jacksonville area homeowners to avoid foreclosure and the negative impact foreclosure has on your credit.


A reinstatement is the simplest solution to avoid foreclosure, but for most folks it is the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will reinstate a mortgage right up to the day before the final foreclosure sale.

  • Benefit: Does not require the mortgage company or lender’s approval.
  • Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan

A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over an agreed upon period of time, thereby they avoid foreclosure. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

  • Benefit: Allows the homeowner to make back payments over time.
  • Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to qualify for this option.

Mortgage Modification

A mortgage modification or loan modification, involves the reduction of one of the following:


  • the interest rate on the loan
  • the principal balance of the loan
  • the term of the loan
  • any combination of the above.

These typically result in a lower payment to the homeowner and a more affordable mortgage so as to avoid foreclosure.

  • Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
  • Drawback: Requires that a homeowner ‘qualify’ for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.  Also many homeowners try this option in hopes of lowering their principal balance due.  Unfortunately, very few of these principal balance reductions ever happen!

Rent the Property to a Third Party

A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

  • Benefit: Allows homeowner to keep property indefinitely.
  • Drawback: Becoming a landlord carries a number of other issues in itself and rent often does not cover the full cost of property ownership and maintenance leaving the homeowner with a negative cash flow anyway.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure allows the homeowner to avoid foreclosure by simply returning the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property. Most people we work with find a short sale to be preferable to a deed in lieu of foreclosure.

  • Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
  • Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.


Many have considered and marketed bankruptcy as a viable option to avoid foreclosure, but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution. Bankruptcy is an extreme step for many people. As with all these options, it is important to seek legal counsel from an attorney who specializes in bankruptcy law.


  • Benefit: Does not require lender approval.
  • Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall the foreclosure process; it won’t stop it. Bankruptcy can be costly, stressful and is damaging to credit scores. It can only be declared once every seven years.


If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to avoid foreclosure by refinancing their mortgage.

  • Benefit: In some cases, this will lower payments.
  • Drawback: In today’s market, a refinance will almost always raise mortgage payments and it carries its own set of expenses. Also, if the homeowner is upside down (insufficient equity) then it may not be an option at all.

Servicemembers Civil Relief Act (for military personnel only)

If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act and thereby avoid foreclosure.

  • Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
  • Drawback: Must be active military to qualify.

Sell the Property

Homeowners with adequate equity in their home can avoid foreclosure by listing their property with a qualified agent that understands the foreclosure process in their area.

  • Benefit: Allows homeowner to Avoid Foreclosureand recoup some of their equity.
  • Drawback: Because of the current market situation, many homeowners simply do not have enough equity to sell their property without negotiating a short sale.

Short Sale

If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate short sale agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

  • Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual’s public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
  • Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

Contact us for a free confidential evaluation of your individual situation, property value, and possible options to avoid foreclosure. We can also set up a free consultation with our real estate attorney.

More About Short Sales:

The Short Sale Center

Before Beginning Your Short Sale

The Short Sale Package