What Are Some Alternatives To Foreclosure?

If a homeowner falls behind on mortgage payments and cannot catch up, the lender may take back the home. The bank can take the property away from the homeowner if they do not pay back the money they owe. This is called foreclosing the property.

A foreclosure is when a lender, especially a mortgage lender, takes back the property being used as collateral on a loan after payments have not been made or if the borrower defaults.

Fortunately, there are several alternatives to foreclosure that may be available to you, depending on your situation. Here we are going to discuss a few of the more common alternatives to foreclosure.


Forbearance refers to stopping the exercise of a statutory right, such as the pursuit of a debt. This option allows you time to make up for any shortfalls while temporarily suspending payments. If you can agree to the conditions and fulfill them, the lender should not pursue foreclosure against you.

For example, your typical mortgage payment might be $500 monthly. With a lump-sum forbearance plan, your first payment could be anywhere from $400-$700. Each month following that until you’re caught up on payments would then be $800 ($500+$300). Most forbearance plans last from three to six months.

Repayment plans

If you have fallen behind on payments, you can negotiate a repayment plan with the lender that will allow you to catch up. The lender will add a percent of the overdue amount to each of your monthly payments for some time.

Loan modification

A mortgage loan modification is often the most popular alternative to foreclosure. This is a long-term solution for a homeowner who cannot make the required installments.

A loan modification is when you and the mortgage company agree to change the terms of your loan. This can make it so you have to pay over a longer period of time, which makes the monthly payment amount lower.

 Loan modifications can also reduce the mortgage interest rate, and principal balance and even defer a portion of the principal balance to the end of the loan.  The purpose of this is to give the borrower a second chance to honor the mortgage loan agreement since the homeowner suffered a previous or even ongoing hardship.

Quitclaim deed 

By signing a quitclaim deed, you give up any ownership interest in a specific piece of property. The buyer accepts all risks by accepting such a deed. Such a document makes no warranties regarding the title; rather, it transfers whatever ownership rights the donor has to the buyer.  This option, however, does not alleviate the homeowner/borrower of the personal liability from the mortgage note.


Refinancing will have a less harmful impact on your credit report, but it’s something you should do before your lender starts the foreclosure procedure. By the time a bank files a foreclosure, it generally wants you off its books, and your best option is to seek a loan modification.


Short sale

A short sale occurs when a borrower sells their property for an amount that is less than the full amount they owe, and it is often used when property values have declined since the mortgage was first taken out.  

The mortgage company needs to approve the final short sale, since the mortgage company is the one taking less than what they are owed.  The borrower will also be responsible for potential tax liability to the IRS for any debt forgiveness associated with the short sale.


Deed in lieu

A deed in lieu of foreclosure occurs when the borrower deeds the property back to the investor or government instead of going through with a foreclosure. This relinquishes their obligations under the mortgage.

Although you may be forced to sell your home due to a mortgage default, it is typically preferable to foreclosure because of the financial and psychological strain that comes with it. It has a lesser effect on your credit rating.

Chapter 13 Bankruptcy

By filing for bankruptcy you can stop a foreclosure in its tracks by invoking the automatic stay.  If the mortgage company forecloses on your home anytime after you filed bankruptcy, then they will be required to set aside the foreclosure to make it as if it never happened. 


Chapter 13 bankruptcy offers an array of options to assist in reorganizing a person’s debt obligation and while in bankruptcy you can even apply for a loan modification with the assistance of your attorney from start to finish. 


There you are. You’ve got a handful of options to stay in your home and keep it from going into foreclosure. You can use these foreclosure alternatives to avoid the negative consequences that come with a foreclosure on your credit report.


What is the simplest solution for a foreclosure?

The easiest way to stop a foreclosure is to request the total amount you owe to the mortgage company and pay it. This is called reinstatement.

How can I stop a foreclosure auction immediately?

If a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. The automatic stay will stop the foreclosure in its tracks. Once you file for bankruptcy, an “automatic stay” goes into effect.

Can you recover from a foreclosure?

A foreclosure may significantly impact your credit scores, but it is feasible to recover from one. You can begin taking action to repair your credit the moment your house is foreclosed upon.