Yikes! Foreclosure notices are scary.

The first thing you must realize is you have 90 days from the date the notice is recorded.  That means you still have about three months before the house is sold. You still have time to act, but you afford a delay.

So, you need to act, but what should you do? You have several options, reinstatement of the loan, loan modification or some other possible settlement workout, short sale, deed-in-lieu of foreclosure or bankruptcy.


For many homeowners, reinstatement is out of the question, however, under Arizona law a homeowner has the right to pay all past due amounts including late fees to reinstate the terms of the original loan until 5:00 p.m. the day before the scheduled trustee’s sale.

Loan Modification or other payment arrangements:

There are many information sources for loan modifications. In an attempt to stem the foreclosure tide, the Federal Government has enacted the Home Affordable Refinance Program (“HARP”), the FHA Home Affordable Modification Program, and Home Affordable Modification Program (“HAMP”).  Each of these programs have different eligibility requirements that can be learned by clicking on the program above. The goal of these programs is to get the loan payments below 31% of gross income, some of them require you to be delinquent and others require a stable payment history over the past 12 months. In addition, your loan must be owned by Fannie Mae or Freddie Mac (or an investor that has agreed to the terms set by the government).

While some progress has been made since the inception of these programs, loan modifications are onerous and often culminate in failure and foreclosure. Ultimately, only 1% of distressed homeowners (approximately 15 million) in the US have received permanent help from this program Of the 5.5 million modification applications that were started from April 2009 to the end of November 2011, only 910,000 received permanent HAMP modifications. Only 152,289 of trial modifications that were converted to permanent status are currently still active. Approximately 50% of trial modifications are canceled due to homeowner default or bank rejection after the trial period. See https://www.hmpadmin.com/portal/news/press.jsp

A loan modification is possible and will absolutely help some people in the perfect position, but in most cases a loan modification only extends the problem it does not resolve the real issue, that the home is worth much less than is owed.  Loan modifications rarely end in principal reductions, thus, the homeowner is still trapped in the house for a long period of time.  To understand the time required to get back to even on the amount owed for the property you can visit helpful sites like, www.shortsalecalculator.co, provided by the Wells Law Group.  This site helps you to determine how long it will take for your home to resurface and become an asset instead of a liability again.

Short Sale:

If successful, Reinstatement and loan modifications allow a homeowner to stay in the home. If that is the ultimate goal of the homeowner those are likely the best options. If a homeowner is more concerned with the bigger issue of being underwater on their mortgage, then short sale is the best solution.  A short sale involves the negotiation of a payoff amount that is less than is owed on a property. A short sale is a responsible alternative to foreclosure.  It demonstrates a homeowner’s good faith in attempting to mitigate losses for all parties involved. In addition, it helps the community by maintaining home values and keeping properties in good condition. As a result, short sales are treated more favorably than foreclosures for credit purposes.  A person that short sales their home as opposed to allowing it to go to foreclosure will likely be able to purchase a new home in 2-3 years (probably closer to 2 years) while an individual with a foreclosure on their record is likely prohibited from obtaining a new loan for 5-7 years (probably closer to 7 years).

Deed-In-Lieu of Foreclosure:

Perhaps the biggest benefit is that a short sale allows for the homeowner to move on with their life and begin with a fresh start. They are no longer saddled with a house that is worth far less than what they still owe.  A short sale has the potential to cure the problem a homeowner is facing rather than trap them in the home for another 10-15 years while they wait for the “market to recover.”

A deed-in-lieu (“DIL”) of foreclosure is a debt settlement agreement between a homeowner and a bank to give the bank the property without requiring a judicial foreclosure or a trustee’s sale. The homeowner negotiates with the bank to accept the property without the bank being required to follow any of the laws that protect homeowners by providing notice and allowing time for redemption or reinstatement of the loan. Banks favor DILs over foreclosure simply because they are not required to expend the resources to foreclose the property. However, lenders usually prefer distressed homeowners to list their properties for sale with a Realtor® before they will accept a DIL.


A Bankruptcy will delay a foreclosure but not forestall the foreclosure indefinitely.  A chapter 7 or 13 bankruptcy puts the payment of all debts on pause after you file with the United States Bankruptcy Court for the District of Arizona.  The court must then determine whether an individual qualifies for bankruptcy protection or not and, if so, which debts are still valid and which are not.   The real estate attorneys at the Wells Law Group believe that declaring bankruptcy should always be the last option, especially if the only debt you are concerned with is your underwater mortgage.

If you have already received a notice of trustee’s sale, you have no time to waste.  You have alternatives to foreclosure, Contact Us today to set up a free consultation to discuss each of your available options.