The PRO's and CON's

Forbearance

A forbearance agreement between you and your lender may allow you to reduce or suspend your current payment for a short period. You may also be able to take delinquencies and cure the default over a period of time by making your regular payment plus an additional amount of the suspended or delinquent amount until you are caught up.

PRO: You are able to remain in your home as the suspended payment or temporarily reduced payment provides you with additional time to catch up, find employment, or recover from a financial set back.

CON: You will have a higher payment at the end of the forbearance period due to the amounts that were past due or suspended. This could increase your payment as much as 20%.

Modification

A loan modification is an agreement between you and your lender changing one or more of the terms of the existing loan. Typically if you have fallen behind and don't have enough money to bring the loan current the lender will lower your current rate and or extend the term of the loan and add the delinquent payments to the back of the loan.

PRO: You are able to remain in your home.

CON: Due to increased debt and bills most people do not qualify and most loan modifications seem to be of little help. Because of this, more than 60% of all loan modifications made are delinquent within 90 days. Due to depreciation most properties have lost so much value they are worth much less than what is owed.

Deed-in-lieu of Foreclosure

A deed-in-lieu of foreclosure is an agreement with your lender to voluntarily transfer the property to your lender. This may be done if you are unable to bring your loan current or sell your home.

PRO: By voluntarily giving your property to your lender you are able to avoid foreclosure procedures, a deed-in-lieu of foreclosure has a slightly less impact on your credit than a foreclosure.

CON: Mandatory waiting period for a new Fannie Mae loan is 4 years, only slightly less than the 5-7 year waiting period after a foreclosure. Your remaining time in the property is considerably less than that of a short sale as you must move out upon signing the property over to the bank. If you have a 2nd mortgage, different investor, this is not an option. Taking a proactive approach with your bank to do a short sale will give you more time in the property and impact your credit less.

Short Sale

A short sale is when your lender(s) accept less than what is owed on the existing loans discounting the balance sufficient enough to pay all the seller sales costs without the need for any out of pocket expense to the homeowner.

PRO: You are able to remain in your home for a longer period of time, saving money. Under terms properly negotiated the lender will, reduce the loan balance, pay all the seller closing costs, and forgive any outstanding/remaining balance. Your credit is much less effect than from a foreclosure. Under new loan guidelines with FHA, Fannie Mae and Freddie Mac the mandatory waiting period for a new home loan is only 2 years instead of 5-7 years following a foreclosure.

CON: In order to receive the debt relief and wipe out the negative equity you must sell your home.