| Three common solutions for foreclosure are loan | | | | six month repayment schedule the new monthly |
| reinstatement, a forbearance agreement, or a loan | | | | payment would be $2,000 + $6,000/6 = $3,000 per |
| modification. While there are numerous other specific | | | | month. In some instances the lender may ask for an |
| ways to stop foreclosures, these three are used | | | | additional cash payment before they will start the |
| frequently. | | | | increased monthly payments. After the 3 or 6 months, |
| Loan reinstatement is where a lender has started the | | | | the loan payments revert to the original amount or |
| foreclosure process and the homeowner finds a way | | | | $2,000 in the above example. The foreclosure does |
| to "reinstate" or pay back the entire deficiency owed. | | | | not stop with the signing of the forbearance |
| The deficiency amount includes back loan payments, | | | | agreement but simply is put on hold until the |
| accelerated interest costs, attorney's fees, assorted | | | | homeowner completes making all the increased |
| expenses, and late penalty charges. This total amount | | | | payments. |
| can accelerate quickly and recently lender's indicated | | | | A loan modification program was the most common |
| that pre-payment penalties may in the future be | | | | method of foreclosure resolution for many years. It |
| included into final judgments. When the homeowner's | | | | involved the lender issuing a new loan agreement |
| reason for the delinquency is partially resolved, the | | | | where the deficiency amount was added to the loan |
| homeowner may ask the lender to take partial | | | | balance and paid in identical monthly payments but for |
| payments. However, the lender will not accept partial | | | | many more months. Another type of loan modification |
| payments and the foreclosure will proceed if the full | | | | was to very slightly increase the monthly payments |
| reinstatement amount isn't paid. | | | | over the remaining term of the loan. So the |
| A forbearance agreement between the lender and | | | | homeowner has a choice of either extended but |
| the homeowner stipulates that the homeowner must | | | | identical payments, or slightly higher payments for the |
| make additional monthly payments for a specific period | | | | original term of the loan. Either option repaid the lender |
| to make up the reinstatement amount. As simple as it | | | | his money back plus interest. It was an affordable |
| sounds, it may be unaffordable for the homeowner | | | | win-win for the lender and the homeowner but is |
| who could barely afford the original loan payment. The | | | | seldom offered anymore. |
| lender will usually ask that the homeowner pay the | | | | Loan modification programs are usually not available |
| reinstatement amount over a three or six month | | | | unless there is a hardship involved such as a death or |
| period. If the monthly loan payment was $2,000 per | | | | illness. But it is worth asking your lender about it if you |
| month and he was 3 months in arrears, the new | | | | are in foreclosure. Your best option is to talk to your |
| monthly payment for a three month period would be | | | | lender and as early as possible so you have time to |
| at least $2,000 + $6,000/3 = $4,000 per month. For a | | | | resolve your problem. |