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Loan modification


A direct loan modification is an arrangement that simply extends the length of your loan. The modification will reduce the interest rate and expenses to the level you can afford. The lender may also make use of the modification by applying the skipped payments to your current balance. It will increase your monthly loan payments so that you need to show that you can continue to make higher payments without defaulting again.


Forbearance is a formal arrangement that assigns a lump-sum fee to the lender. You pay your daily payment plus half of your mortgage payment every month thereafter. For example, if your daily mortgage payment is $600 a month, your initial lump-sum payment may be $500 to $800. And every month thereafter, once you're up to date, the payment will be $900 ($600 plus $300). Most forbearance plans are for three to six months.


Deed in Lieu of Foreclosure


An act in lieu of foreclosure is when you voluntarily return the property to the lender (or government) in exchange for the release of all of your mortgage obligations. If you lose your home, it is typically preferable to foreclose due to the cost and emotional distress of a foreclosure. And it's less detrimental to your credit scores. In certain instances, the Federal Housing Administration (FHA) will also pay the creditor a stipend to execute the deed instead of the foreclosure.


Short Sale 


Short selling, also known as short repayment, operates when the value of the property has fallen after the borrower took out the mortgage. It helps you to sell less than the full amount you owe. On VA loans, the Department of Veterans Affairs has the authority to buy defaulted loans from creditors and to take over the operation of the mortgage loan. Short selling is an option on the part of the government, and not every borrower is eligible.

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