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OPTION #2 - THE HOME IS FORECLOSED
As a result of either the inability to bring the loan current, or because the bank will not allow you to modify your loan to keep the home, the bank will continue into foreclosure. Once this happens, there really is no way to stop foreclosure without getting into a situation mentioned previously. It's time to face the fact, the home is no longer going to be yours. It's tough, but the sooner you accept it, the sooner you can put yourself into a position to make the most out of it.
The foreclosure process takes several months. That is beneficial to you because it gives you time. If you use the first few weeks wisely, then that time in turn gives you options. Ultimately the country Sheriff will post an auction notice on the door. The home will be sold to the highest bidder (the bank opens the bidding at the loan amount). You will want to be completely moved out of the home by the time the auction occurs. Shortly after the auction the Sheriff will appear at the home and have all the locks changed and remove people from the home.
Once the home is foreclosed the bank (or highest bidder) owns the home. Any equity you may have had in the home is now gone. Even if you put down a large down-payment when you purchased the home, you will lose it, and the equity the home may have gained.
A foreclosure is long and stressful, and there is an easier way.
OPTION #3 - YOU RECOVER WHAT YOU CAN
Once a homeowner comes to terms with the fact that they will be losing the home, they can start making arrangements to get the most out of a bad situation. No, that does not mean you can start taking valuable items such as the dishwasher and kitchen sink and sell it. That is against the law and you could find yourself in jail. It means you can sell your home -- one way or another -- and walk away in a much better situation than the alternative.
If you have enough equity in the home, you can sell the home. You may even walk away with some money. But what happens if you don't have enough (or any) equity in the home? Can you still sell? Absolutely. It's called a short sale. A short sale occurs when the total sales price of a home is less than the amount required to 1) pay off the mortgage, 2) pay the selling costs, & 3) cover any liens or any other expenses. It is called a "short sale" because the bank is going to "short" themselves in order to keep from having to complete foreclosure.
Why would the bank do this? Because the cost of going through a foreclosure, plus the cost of owning the home, plus the cost of reselling the home is going to be much greater than the cost of taking a loss and agreeing to sell the home for less than what is owed. They are cutting their losses so to speak, not to mention saving months of work for many employees.
A short sale is the best option for any homeowner that is heading towards foreclosure that wants to avoid months of pain and torment. The best part is they are easy. You just need to find a good agent, such as Utah Full Service Brokers, and they will take care of the rest. They will work with the bank (assuming you provide some information to the bank) and all you have to do is show the home and sign offers. The agents earn their commission, and the bank pays it. Your out of pocket expenses? Nothing.
Unlike trying to get a new loan, or dealing with an unscrupulous investor that cost you money, a short sale can put money back into your pocket. Since you are in foreclosure you are not making payments. And since you don't have some tricky investor taking your money from you, that money is better put to use by you elsewhere. It's a no brainer.