| Most homeowners are aware of the basic ways to | | | | twenty-four months are fairly common time frames |
| stop a foreclosure - refinancing, obtaining a loan | | | | for a repayment plan for seriously delinquent |
| modification, selling the house, or filing bankruptcy. But | | | | borrowers, although even longer plans can be |
| depending on the circumstances, there may be more | | | | proposed to avoid foreclosure. |
| options available in special cases. Three other methods | | | | Although there are numerous methods when it comes |
| borrowers can use are recasting their loan, examining | | | | to loan modification, here are five common ones that |
| different repayment plans, and charging off their loan. | | | | banks and homeowners often agree to: |
| Recasting a loan refers to a type of modification of | | | | 1. Reducing the interest rate |
| the original note where the missed payments are | | | | 2. Reducing the principal balance of the mortgage |
| added to the back end of a mortgage. The life of the | | | | 3. Extending the payment period of the loan |
| loan is extended and the borrowers will eventually | | | | 4. Reamortizing the loan and the arrears |
| have to pay back those missed payments. | | | | 5. Placing a deferred junior lien on the home |
| Although recasting a loan sounds like a great idea that | | | | One reason borrowers request financial hardship |
| could help many borrowers get back on track with a | | | | information and income and asset documentation in the |
| regular monthly payment and worry about their arrears | | | | case of a short sale is to make sure that a deficiency |
| at the end of the loan or when they refinance or sell, | | | | judgment has little value. If homeowners claim to have |
| leave it up to the mortgage industry to mess it up. | | | | a lot of assets, the bank may just foreclose and |
| Mortgage accounting rules have been changed, and | | | | pursue a deficiency. |
| many large lenders and Fannie and Freddie no longer | | | | Clear title can not be conveyed through a deed in lieu |
| recast loans. | | | | of foreclosure. If there are tax liens, second |
| Short term repayment plans can be verbally agreed to | | | | mortgages, mechanic's liens, or similar issues, the bank |
| with a lender or mortgage servicer and usually last | | | | will not accept the deed in lieu. In that case, the |
| from three to six months. Longer term plans need | | | | foreclosure will usually go forward if the borrowers |
| approval from the mortgage holder. Twelve to | | | | can not sell or work out another arrangement. |