When you're facing foreclosure in Southern California, it’s important to approach the situation from a financial perspective rather than an emotional one. While the stress can be overwhelming, taking a step back and evaluating your options with a clear head can help you make the best decision for your future.
Start by identifying which options align with your financial goals and personal circumstances. Are you hoping to keep the home or is your priority to move on and avoid further damage to your credit? Understanding your end goal will help narrow down your choices.
Although time may be running short, resist the urge to make a rushed decision. Carefully review each option and consider its long-term impact. Once you’ve chosen a path, it’s essential to act quickly. Many lenders require that any resolution be finalized at least 21 days before the scheduled foreclosure date, so timing is critical.
Remember, foreclosure doesn’t define you. With the right plan in place, you can take back control and move toward a stronger financial future.
10 Options When Facing Foreclosure
PAYOFF
This involves paying off the entire loan balance, including any missed payments, penalties and fees. Obviously, most people who have access to enough money to pay off their mortgage are probably not facing this situation in the first place, but there are situations where people inadvertently stop paying their mortgage even though they have the means to do so.
REINSTATEMENT
This involves paying just the amount you're behind on—known as the default amount—along with any accumulated interest, attorney fees, late charges, property taxes and other related costs. It’s a lump-sum payment meant to bring your loan current and stop the foreclosure process. As with the Payoff option above, most people who have access to enough money for reinstatement are probably not facing this situation. However, if you have access to enough money to make reinstatement happen, this is a quick and easy solution.
REFINANCE
This involves paying off the entire loan balance, including any missed payments, penalties, and fees by taking out a new loan to cover the old one. However, the new loan often comes with a higher interest rate due to your recent default (and maybe market conditions), and it may include prepayment penalties. For this option to work effectively, there generally needs to be sufficient equity in the home and an adequate income stream to qualify for refinancing and cover the outstanding debt.
LOAN MODIFICATION
This involves working with your existing mortgage lender to refinance the loan or extend its terms. By adjusting the payment structure, it may become more affordable and give you a chance to catch up on missed payments. To qualify, you’ll need to demonstrate to the lender that the financial hardship that caused the delinquency has been resolved and that you’re now in a stable position to keep up with future payments.
FORBEARANCE
This involves asking your lender to create a repayment plan tailored to your current financial situation. In some cases, they might temporarily reduce or even suspend your mortgage payments. To qualify, you’ll need to provide documentation that demonstrates your ability to meet the terms of the new plan once it begins. This option can offer short-term relief while helping you avoid foreclosure.
PARTIAL CLAIM
This is a request directed toward your lender or HUD that may offer a second loan to cover missed payments, late fees and other associated costs. This allows you to bring your primary mortgage current while repaying the second loan under separate terms. To qualify, you’ll need to demonstrate that you’re now in a stable position to keep up with future payments.
DEED-IN-LIEU OF FORECLOSURE
This involves voluntarily transferring the property back to the lender in order to avoid the foreclosure process. The lender typically requires that the home be in good condition. It’s important to note that most loan applications will ask if you’ve ever gone through a Deed-in-Lieu of Foreclosure, so this option could impact future lending opportunities.
BANKRUPTCY
This option can liquidate debt and/or allow more time for you to resolve your foreclosure. You will need a qualified bankruptcy attorney. Keep in mind that a bankruptcy filing will show up on your credit report and could impact future lending opportunities.
DO NOTHING
If you choose not to take action, your home will likely be sold at a foreclosure auction. Unfortunately, this outcome can have lasting consequences. Most loan applications ask whether you’ve experienced a foreclosure. It will also appear on your credit report—significantly impacting your ability to borrow in the future. If you have equity in the home, you may lose it and/or have to pursue the lender to recover any funds they received at auction in excess of what you owed them. In most cases, doing nothing is the most damaging option available.
SALE
If your property has equity, meaning there’s money left over after paying off all loans and financial obligations, you can sell the home through a conventional or off-market sale without needing lender approval. In this case, you would receive cash from the sale. However, if the sale proceeds are less than you owe on the property, you may need to negotiate a short sale with your lender. A short sale is where the lender accepts a payoff less than the total amount owed if the lender agrees that it’s the most the property can be sold for.
Bottom Line
Facing foreclosure is incredibly stressful, but you don’t have to go through it alone or feel stuck without options. Whether you're looking to keep your home, minimize damage to your credit or walk away with a fresh start, there are real solutions available. The key is to act quickly, stay informed, work with advisors you trust and choose the path that best fits your financial goals. If you’re feeling overwhelmed or unsure where to start, please reach out to us and let’s find the best option for your situation. We are here to help you navigate the process and explore the best option for your Southern California home with honesty, compassion and real results.
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