A public information resource sponsored by the Law Office of David W. Martin - (800) 229-0546


If your home is in foreclosure or the threat of foreclosure is imminent, you should explore the variety of legal options available to you, including:

Deed in Lieu of Foreclosure
Loan Modification
Repayment Plan / Forebearance Agreement
Short Sale

Many of these options require negotiation with your lender. You can do this with assistance or on your own. Given the situation in the home mortgage and foreclosure market, it is clear that the banks must be more flexible working out solutions for delinquent borrowers.

Which path you choose to pursue is important because each strategy will have a different effect on your FICO credit score and your rights in the property.


Bankruptcy can be a powerful tool to stop foreclosure proceedings and possibly save your home, but it also has serious implication on your credit and your future ability to purchase a home. Anyone considering bankruptcy should explore their other options before filing.

Faced with foreclosure, many will find that filing bankruptcy is a viable option. There are several advantages that bankruptcy gives the homeowner in foreclosure:

Filing Automatically Stops Foreclosure Actions
Bankruptcy Laws May Help You Save Your Home Permanently
Filing Gives You Time to Sell the Home Yourself or Make Other Arrangements

For more information visit our Bankruptcy & Foreclosure page.

DEED IN LIEU OF FORECLOSURE: Most lenders have criteria in place that allow borrowers to walk away from their homes without going through the foreclosure process. The lender will typically require that you attempt to sell the home first.

You can contact the loss mitigation department of your lender and find the criteria. The deed in lieu of foreclosure is a viable option for those who are “upside down” on their homes (they owe more than the home’s actual value), as it has a lesser effect on your credit score than some of the other alternatives.

LOAN MODIFICATION: Because banks don’t want to own homes, and they take huge losses on the properties they acquire through foreclosure, you would think that they would prefer to negotiate the terms of your loan or work-out an alternative payment plan. This used to be rare, but recently banks have begun to make significant cuts in both rates and principal.

You can negotiate your loan on your own, or you can hire someone to negotiate the loan for you. There are agencies in almost every county that will assist you with this for FREE.

REPAYMENT PLAN / FOREBEARANCE AGREEMENT: Your lender might agree to a repayment plan in which you make-up the missed payment over the course of time, or agree not to foreclose if you make certain commitments.

SHORT REFINANCE / SHORT RE-FI: If your credit is such that you might be able to obtain a loan from another lender, you may be able to re-purchase your home for its current value and thus save yourself the difference between the amount owed on the property and its current value. The mechanics of the short refinance are very similar to those of the short sale, discussed below.

SHORT SALE: If you want to sell your house for less than you owe on it, or otherwise have access to funds that would enable you to buy your lender’s note (if you own another home with equity, for example), you may be able to negotiate a short sale – a settlement with the bank in which you pay them off for less than the amount owed.

The difference between the price paid and the amount owed may be taxable, so make sure to consult a professional before signing a short sale agreement.