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Options Laid Out for Homeowners Facing Foreclosure

By Faye Mergel
Published: Friday, January 15th, 2010

Finance advisers do not want to see more Americans lose their homes this year, but they believe it is best to let them know what their options are when facing imminent foreclosure. There is no option that will not cause any adverse impact on a credit report, but consumers can at least choose one that would best suit their situation.

Options Laid Out for Homeowners Facing ForeclosureMany states across the country saw rapid increase when it comes to foreclosure rates. In California, 40 percent of its 2009 home sales were obtained through foreclosure or short sales. In Las Vegas and Phoenix, they have reached as high as 50 percent. Last year, 1.43 million bankruptcy filings were caused in part by foreclosure. Combined with the high unemployment rate, what America gets is a huge number of its citizens most likely to lose their homes than keep them this year. With 2009 being the seventh worst year on record for homeowners, prompted finance specialists to inform Americans what they could do when facing imminent dangers of foreclosure.

According to industry specialists, short sale is one of the most common options for foreclosed homeowners. Here, a proprietor sells his home for less than what he owes on his mortgage instead of falling into foreclosure. This option is not damaging on a credit report as a foreclosure, but it still hurts a person’s creditworthiness. Before approving a short sale, lenders take a number of considerations such as the amount of assets a borrower has and whether he has already defaulted on his mortgage.

While many homeowners prefer selling their homes themselves, some prefer letting the lenders do it. They give the keys to their lenders and then the lenders sell the house or property to recover a part or a whole of the mortgage loan balance. Specialists call this process “deed in lieu of foreclosure.” This does not help a credit report or rating in any way, but some homeowners consider it less invasive than foreclosure.

Loan officer, Rich Hayden, says deeds in lieu of foreclosure are very popular among homeowners who are uncertain where they want to steer their financial path.

Still, many finance advisers believe that the best way to fix a financially-troubled property is to contact one’s creditor. Hayden adds that many people who are behind their mortgage or credit card payments are afraid to contact their creditor because they have been receiving calls from collection agencies threatening them to take their house away. He advises consumers to know their rights and simply be honest about their situation.

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