The Three Most-Used Methods of Resolving a Foreclosure
by: Dave Dinkel
While there are numerous ways to stop foreclosures, three are used most frequently. They are: loan reinstatement, forbearance agreement, and loan modification.
1Loan reinstatement is where a lender has started the foreclosure process and the homeowner finds a way to pay back or "reinstate" the entire deficiency owed. The deficiency amount includes back loan principal and interest payments, accelerated interest costs, attorney's fees, assorted processing and collection expenses, and late penalty charges. This technique requires the maximum amount of money all at once. Ironically, lenders recently indicated that pre-payment penalties may be included into final judgments in the near future.
When the homeowner's reason for the delinquency is resolved, he or she usually asks the lender to take partial payments because he or she can't get the entire deficiency amount together. However, the lender will not accept partial payments and the foreclosure will proceed if the full reinstatement amount isn't paid. The reason for this is simple, the lender knows that the homeowner's chance of getting out of, and staying out of foreclosure is less than 1 in 8. So the lender does not want to delay the inevitable, the loss of the home to foreclosure.