The options presented in Part 1 are options which enable the distressed homeowner to keep their property. Unfortunately, there are times when this is not possible. The homeowner could have suffered a job loss and cannot qualify for a Refinance. It could also be that lenders are just not willing to accept a Loan Modification even after intense negotiations. And lastly, lenders could just be set on foreclosing despite numerous reasons to entertain other options. In this situation, the homeowner must choose an option which limits his/her losses. This, in the long run, will speed up the financial recovery.

*Please note that the options below are not the only options available and are subject to change along with the shifting of the economic environment. Also, there is no guarantee that any one option will work for you because all cases are unique to the individual situation. Always seek competent professional counsel (Legal, accounting and etc) before attempting the following options. *

Part 2 - Options that can stop the bleeding and get your life back on track!

Option 4. Deed in Lieu

The Deed in Lieu option entails the homeowner giving away the property to the lender under the assumption that doing so will satisfy the mortgage in full. The Deed in Lieu option is negotiation intensive as there can be many complications which could result in the lender rejecting the idea. For obvious reasons, the lender will be hesitant to accept a Deed in Lieu if the subject property has no or negative equity in it. On the other hand, the lenders might entertain a Deed in Lieu because it costs less than going through the foreclosure process. In many instances, lenders expect to see genuine attempts by the homeowner of listing and marketing the property before considering a Deed in Lieu. An experienced and competent negotiation company can convince the lender to accept the Deed in Lieu. For this reason is highly recommended a professional company handle the Deed in Lieu process. Also, outside of foreclosure, this option can do the most damage to one's credit so it is best to follow up with a credit repair solution as soon as possible.

Option 5. Short Sale

A short sale is a sale of the subject property under the lenders approval to a third party at a lower price than the mortgage balance. The lenders have the incentive to approve a short sale because the foreclosure process incurs a great deal of costs in time and money. Lenders with second or third position on the mortgage will also be motivated to negotiate since they will lose their entire investment through foreclosure process. Also, government programs such as HAFA (Home Affordable Foreclosure Alternatives, starting April 5th, 2010) are helping to make Short Sale a more viable option for distress homeowners.
Short Sale is the most negotiation intensive and time consuming option mentioned in this article. The parties involved in a short sale not only include the homeowner and the lenders but also a buyer, which complicates the process many times over. In fact, most lenders will require there be a buyer even before a Short Sale can be proposed. Additionally, the average time it takes to complete a Short Sale is 3 months but it could take longer depending on the circumstances.
In a best case scenario, a Short Sale will settle the entire mortgage balance. Under the new HAFA program, Lenders are required to forfeit their right to pursue the homeowner in the future upon the successful completion of a Short Sale. However, it is important to remember that HAFA is a new program and its effectiveness is yet to be tested. Many homeowners might not qualify for the program. Lenders might react negatively and set up impossible guidelines to hinder the program. Second or third position lien holders might want to retain their option to recover losses at a later date. Distress homeowners should be aware that lenders could attempt to recover some of its losses through a deficiency judgment or a promissory note.
A deficiency judgment is a legal action in which the lender pursues the homeowner for their losses incurred through a foreclosure or a Short Sale. A promissory note is not a legal action but a non-secured agreement that the homeowner will pay back the lender's losses over a period of time, typically through small monthly payments. Deficiency judgments are very rare but promissory notes are a bit more common.
In a Short Sale, the amount involved in both the deficiency judgment and the promissory note is limited to the difference between the mortgage balance and the amount recovered, with the terms being decided upon during negotiation. For example, let's imagine the subject property is worth $250,000(a), with a mortgage balance of $300,000(b) and a short sale approved for $200,000(c). $100,000(b-c) will be amount of either the deficiency judgment or the promissory note. In a foreclosure, the deficiency judgment will be for the full mortgage balance of $300,000(b).
In a Short Sale, there can be tax consequences which are specific to the individual. It is very important to consult a competent attorney and an accountant before moving forward with a Short Sale.

Foreclosure is a lose-lose proposition for both the lenders and the homeowner. In essence, attempting a Short Sale or a Deed in Lieu is saving the lenders from themselves who will accept mounting losses for the ultimate goal of relieving the homeowner's financial burden. A successful Short Sale or Deed in lieu will stop the financial bleeding and will allow the homeowner to continue to the next phase towards financial recovery.

Article Source: http://www.ArticleBlast.com