Foreclosure is one of biggest problems the people of America are facing right now. Countless of homeowners default on their mortgages and thus find themselves on the brink of losing their homes, or are already facing the devastating situation already. This widespread occurrence is due to the dire economic situation the country is facing right now and people are simply not able to keep up with their financial obligations as money becomes harder and harder to come by.

The legal process of foreclosure is not sudden—it does not happen overnight. It generally takes place when a homeowner consecutively misses mortgage payments every month. These accumulating missed payments prompt lenders to take action. However, there’s still hope for those whose properties have not been foreclosed yet. There are in fact a variety of work out options and other ways for a person to avoid foreclosure altogether. A good example is loan modification.

(1) Loan Modification – This is probably the most popular and most effective solution to prevent foreclosure. It is a process wherein one or more terms of a borrower’s loan are permanently changed. If the loan is modified successfully, the person can expect to enjoy lowered monthly payments, reduced interest rates, a 30 or 40-year fixed loan, principal balance reduction, partially or completely waived past payments, credit preservation and home ownership preservation.

(2) Forbearance – This is an agreement with the mortgage company where the homeowner agrees to pay a portion of his or her regular payment or none of it for a certain period of time. The company will then offer that person a temporary reduction or suspension until he or she is able to sort financial matters out and be able to make regular payments. Usually, this is combined with a repayment or reinstatement plan to pay off missed payments.

(3) Refinance – As long as the property or home in question has enough equity, the homeowner can use his or her new mortgage to pay off his or her old loan along with any late or even attorney’s fees. If this is the chosen alternative to avoid foreclosure, then it is a good idea to look around for the best terms being offered and then compare the Annual Percentage Rate or APR.

(4) Reinstatement – A borrower may be given the chance to pay off the total indebted sum in a lump sum payment on a specific, negotiated date. This option is usually combined with forbearance because the person can show that funds from a bonus, tax refund or other sources will become available at a certain time.

(5) Repayment Plan – For this workout option, the mortgage company or lender can help the delinquent borrower catch up with missed payments with the creation of a feasible schedule for repaying past due amounts. The amount the borrower is behind can be combined with a portion of what is due on a regular monthly payment.

(6) Short Sale – The person can sell his or her home. In case the amount received from the sale is not enough to pay off the loan the mortgage company will be willing to accept a payoff amount that’s less than what is owed on the borrower’s balance.

(7) Deed-in-lieu Foreclosure – The borrower can voluntarily transfer the title of his or her property to the lender in exchange for the cancellation of the mortgage debt.