Ways to Avoid Foreclosure and Get Out of Mortgage Debt

In today’s economy, many people are having difficulty keeping up with their home loan payments. This can be risky, as homes risk going into foreclosure if the owner defaults on a loan. Mortgage lenders will take ownership of a foreclosed home and sell it to recover the money they lost from the defaulted loan. By learning Ways to avoid foreclosure, many people have been able to keep their mortgage loans out of default and save their homes from foreclosure.


  • Sometimes, simply refinancing a mortgage to have lower payments is all that is needed to prevent default. Many people may have recently suffered a pay cut or taken a job that has a lower salary that they are accustomed to. Programs like the Home Affordable Modification Act, Home Affordable Refinance Program, Second Lien Modification Program and the Principal Reduction Alternative all offer homeowners the opportunity to modify their existing home loan and lower their payments.
  • The housing market recently has declined, and as a result, many homes lost significant value. Some homeowners owe more on their mortgage loans than their homes are currently worth. This is referred to as being underwater on the home. In these cases, the Principal Reduction Alternative, the Second Lien Program from the Treasure and FHA and the Home Affordable Refinance Program can all help reduce loan amounts and payments to reflect the home’s current worth.
  • For homeowners that are recently unemployed, avoiding foreclosure can be a challenge. There are several programs designed to reduce or postpone payments for unemployed homeowners. This gives them a chance to find a new job and improve their financial stability. Programs to help unemployed homeowners include the Emergency Homeowners’ Loan Program, Forbearance for Unemployed Homeowners from the Federal Housing Administration, and the Home Affordable Program.
  • If it is not possible to refinance a home’s mortgage, and there are no other alternatives for repaying the loan, sometimes a short sale is the best way to keep a home from going into foreclosure. Mortgage lenders will allow short sales from some homeowners to recover some of the loan amount. Using short sales also tends to save banks time and money. If a home goes into foreclosure and the bank decides to sell house cash from the sale might not completely cover the existing loan amount. In these cases, loan holder may still have to pay back the remaining balance to the lender. In a short sale, the bank agrees that whatever the home is sold for will be adequate to cover the existing loan. Even if the home is sold for less than what remains on the mortgage, the debt is considered paid in full. Short sales still result in a loss of the home and can affect credit, but they are a good last effort to avoid going into foreclosure.

The recent housing market and economy have made it difficult for homeowners to make their mortgage payments on time. Some people may simply not make enough money to keep up with high loan payments, and others may have lost their job completely. There are several government programs available to help people keep their homes from going into foreclosure. When there are no other rehabilitation options on a loan, a short sale can be the best way to prevent foreclosure and repay the mortgage loan.