Sometimes a homeowner will experience a significant financial hardship that leads them to fall behind on their mortgage payments. If a homeowner in Philadelphia defaults on their mortgage payments, they may eventually face the foreclosure of their home by their lender.

Sometimes homeowners can work out a loan modification with their lender to stop foreclosure. However, if this isn’t possible and Notice of Default is filed, homeowners may still be able to avoid foreclosure. The following are four options homeowners may have if loan negotiations failed and foreclosure proceedings have begun.

Sell the home

Although this option will not allow a homeowner to retain ownership of their property, it can help them put a stop to the foreclosure process and protect their credit. If they can sell the home for a profit, it can also provide them with the financial resources they need to address the issues that led to the commencement of the foreclosure process in the first place.

Short sales

In a short sale, the homeowner negotiates with their lender to have the lender accept less than what they were owed through the original mortgage. Again, while this means the property will be sold, it will at least stop the property from being foreclosed upon. Short sales can still affect a homeowner’s credit, but not always to the extent that a foreclosure would.

Deeding the home

Another way to stop foreclosure is to deed the home back to the lender. This is referred to as a “deed-in-lieu of foreclosure.” Essentially, the homeowner will provide the lender with a notarized deed to the property, and the lender will then forgive what is owed. This stops the foreclosure proceedings. Homeowners who choose this route can still expect it to impact their credit as much as a foreclosure would. However, they will no longer be liable for the mortgage, which some find preferable.

File for bankruptcy

Bankruptcy may seem like a harsh option, but for some it is a viable way to at least put a halt to foreclosure proceedings. When a homeowner files for bankruptcy, it puts an “automatic stay” on the foreclosure of their property. Then, depending on the type of bankruptcy the homeowner files, their overdue mortgage payments may be consolidated, or a repayment plan may be executed that allows them to pay back what they owe in a manageable way. Keep in mind, however, that it is possible in certain circumstances for a lender to “lift” an automatic stay, in which case the foreclosure will continue.

So, while those who are underwater on their mortgage may find it in their best interests to negotiate a loan modification, thus allowing them to keep their home, this isn’t always possible. However, there are options that can help homeowners facing foreclosure even after proceedings have begun that could lessen the amount they owe on the loan or lessen the impact on their credit. Homeowners who are unable to pay their mortgage may want to seek legal advice to determine if a negotiation is possible, or what their options are if the foreclosure has already commenced. Attorneys can help their clients find the right solution to their legal concerns. Our firm’s website has more information on this topic that readers may find useful.