FORECLOSURE (Part II): Reinstatement and Forbearance, Repayment and Loan Modification

In our last article, FORECLOSURE (Part I): A Cruel Reality of the DC, Maryland, Virginia Real Estate Market, we spoke about being able to refinance the property into a more stable loan program. In part II we will focus on other options a homeowner has to avoid foreclosure. The options we will discuss in this article are forbearance, repayment plan, and loan modification.

First of all what is forbearance? The merriam-webster dictionary defines it as "a refraining from the enforcement of something (as a debt, right, or obligation) that is due". Basically you are asking the lender to put off the debt for a short period of time until you are able to pay it off or reinstate the loan. Most of the time this option is not provided to the homeowner, notes attorney Kevin Shipe, because of the high default rates.

You can also try to arrange a repayment plan with the lender. A repayment plan basically adds what is owed to the lender to your current payments for a specific number of months until the total debt owed is repayed. This works well if you had a temporary loss of employment or if you are expecting a large bonus in the near future.

The last option we will discuss today is a loan modification. A loan modification is when the lender agrees to add the past due amount to the toal loan amount and extend the financing period. Also the lender could take steps to reduce your payments.

All of these are viable options to avoid foreclosure, but I cannot stress enough the importance of being in communication with your lender. Remember that this problem will not go away by simply ignoring it. Take an active role in resolving this issue with your lender and you might just save your home from foreclosure.