Foreclosure Alternatives Available To Homeowners In May–Should Homeowners Look To Other Options Outside Of HAFA?

Many homeowners have become aware of foreclosure alternative programs which are available to those who may be in a position where negative equity has become a problem or simple factors that have led to the inability of homeowners to meet their home loan payment are in place and, as a result, homeowners are seeking either a short sale or deed in lieu of foreclosure program. Data that was released in the early part of May has stated that servicers completed about 959 HAFA transactions between the months of February and March, but there are still homeowners who are looking for these opportunities at the present time.

There have been mixed reports across the nation which have stated some areas of the housing market have seen further decreases, certain states are still facing high levels of unemployment, and property values are predicted by some financial institutions to drop further in the near future, all of which have many homeowners viewing their predicament in a negative light. However, there are some indications and predictions by banks that the housing market and property values will begin to improve in the latter part of 2011, so this has led some to question whether homeowners should be looking for alternative options outside of these short sale or deed in lieu of foreclosure programs.

In certain cases, homeowners are simply unable to use any other form of foreclosure prevention and, as a result, will require one of these programs before they can avoid a formal foreclosure. Yet, reports released over the past weeks have indicated that homeowners who participate in a short sale, as an example, typically face the same amount of damage to their credit score as someone who simply faces foreclosure altogether, but arguments are also being made that when homeowners lose their home as a result of unforeseeable and unavoidable financial distress, rather than walking away, lenders may be more lenient, in the future, on these particular homeowners.

Before a homeowner looks to one of these alternative options, though, many officials suggest that homeowners at least consider opportunities that may be available through alternative home loan modifications, as one example. Homeowners who qualify for the Home Affordable Foreclosure Alternatives program are required to at least be reviewed for a potential federal home loan modification plan, but when these plans are unhelpful or unavailable many servicers may offer homeowners the option to short sell or surrender their deed.

The good news for homeowners is that there are alternative foreclosure prevention options like in-house modifications that can be used to not only help homeowners avoid a short sale or deed in lieu of foreclosure program, but may help them stay in their home when even a federal modification plan is unavailable. This will require homeowners working closely with their servicer to look for options available specifically for their particular situation, but since foreclosure alternatives are not optimal, these alternative modifications may be more beneficial for certain individuals when it comes to finding the affordability they need at the present time.