Loan Modification or Loan Work-Out-This is when the mortgage lender modifies your current mortgage in order to work with you and make your mortgage more affordable. In the past this was only used when a borrower was delinquent but now it is being used before someone is delinquent. This will be the hottest term and way to help people avoid foreclosure.

Forbearance- This is the most popular option prior to the sub-prime mortgage crisis of 2006.  Forbearance was commonly used when a Notice of Default had been filed by the mortgage lender. With forbearance, the borrower is typically offered reduced monthly payments for a 3- 6 months.

Short Sale Transaction- When a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. A short sale is typically executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.  Definition from Wikipedia

Refinance Loan – Is a new mortgage loan in which the defaulted mortgage is paid off. In most cases this is a sub-prime, hard money, or FHA Secure mortgage.  The sub-prime and hard money financing typically offer high interest rates which make the affordability very difficult. The key component for refinancing out of foreclosure is equity.  In most cases lenders will require Loan-to-Value at or below 60%.

Deed-in-lieu - is a deed instrument in which the borrower conveys all interest in a real property back to the mortgage lender.  The homeowner does this in an effort to satisfy the past due for the mortgage to stop current or potential foreclosure proceedings. The deed in lieu of foreclosure enables the borrower to be immediately released from most or all deficiencies associated with the loan in default.  It should be noted that this option is rarely agreed to by most lenders today.

Chapter 13 Bankruptcy –is a popular option used by foreclosure lawyers to stop the process of home loan defaults. In most case, the bankruptcy petition must be completed and filed prior to the sale date of your home. After filing, your bankruptcy attorney will propose a payment plan for the mortgage and debt to be repaid.  The filing of a Chapter 13 bankruptcy ceases all collection activity though the “automatic stay”. The automatic stay continues for the life of the bankruptcy case unless otherwise ordered by the BK court.  Some homeowners will try and sell their home while under Chapter 13 if you wish to apply the gains from the sale towards the bankruptcy debts. In most cases, a Chapter 13 bankruptcy stops the foreclosure immediately.