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Mark Cappel
UpdatedApr 1, 2010

We must leave the area and cannot sell our home. What are our options aside from foreclosure?

My fiance and I bought a home in 2007 for $159,000. About one year ago our mortgage company did not cash our checks for 3 months of payments. When we called they told us it was applied and the mortgage was current. We then received call with a recorded message saying our mortgage company had been bought out by another lender. I researched the news Web sites, and learned the mortgage company failed because of fraud and accepting too many loans. Our new company Ocwen Financial Corp. then contacted us saying we were about 5 or 6 payments behind. Long story short we ended up doing a loan modification. But we keep receiving different statements saying we owe more than our loan modification. They tied it back into our loan and it is now $167,000. Due to some serious family health issues we now need to move within the next three months. We don't want to foreclose. Friends of ours say they have a VA loan and would love to have our home and property. I don't know what our options are opposed to foreclosure. We certainly do not want a foreclosure on our credit. Would we benefit from deed in lieu of foreclosure or quick sale? Or is that even an option for us? We absolutely HAVE to move. I hope you can help!

Your situation is complicated somewhat by the failure of the original mortgage company and the botched hand-off of your account by the original to the successor mortgage company. I will not address this issue, and will assume you either resolved it on your own or retained counsel to do so.

You do not mention the current market value of your property. Go to to learn the prices for comparable properties in your area. However, take Zillow's home value figures for what they are -- a computer-generated estimate that is blind to nuance and incapable of keeping up with fast-moving markets.

Let us assume for the sake of argument that the market value of your property is less than whatever balance the present mortgage company thinks it is. To learn more about each of these options I am about to discuss below, I encourage you to start with the resource I Can't Afford My Home, What Should I Do?

Short sale & deed in lieu of foreclosure

You have several options if you either cannot afford your mortgage payments or wish to sell a house that has a market value less than the balance of the mortgage. You can do a short sale, deed in lieu of foreclosure, or walk away from the property and allow foreclosure.

A short sale is where the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. In a deed in lieu of foreclosure, the property owner surrenders the house to the lender voluntarily in exchange for the lender canceling the loan. You should pursue all available alternatives to foreclosure. To learn more about these two options, see Home Affordable Foreclosure Alternatives Program.


Foreclosure is the legal process through which a lender (most typically a mortgage lender) claims an asset from the consumer borrower who has defaulted on their mortgage payments. Because foreclosure is expensive and usually results in a poor return, lenders do not like foreclosure any more than homeowners do. Accordingly, learn more about the aforementioned Home Affordable Foreclosure Alternatives (HAFA) program, which is a federal program that offers financial incentives and guidelines to lenders and homeowners to avoid foreclosure.

VA home loan

You mentioned you have friends with a U.S. Department of Veterans Affairs (VA) loan who would love to buy your property. I do not see your friends as an immediate help to you if the market value of the property is less than the balance of your mortgage. The VA requires that all borrowers get an appraisal of the property before purchase, and it is unlikely that the VA will allow the borrowers to pay more than the market value of the property no matter how much in love with the property the borrowers are.

Instead, the bank servicing the VA loan will advise the borrowers to stand back and wait either for the property to be priced at the market value, or to wait for your property to go into short sale or foreclosure, after which the borrowers will buy the property at its current market value.

I hope this information helps you Find. Learn & Save.




MMartha, Jan, 2012
We moved over a year ago. Our house has been for sale for 15 months. The bank rejected a short sale offer so many times that the buyer backed out. We have not make a payment for a year now, because my husband's previous employer gave him a housing allowance for it, and the current provider provides the actual housing. We owe $78K on the original mortgage. We also owe $28K with a second mortgage, but we are current on that and can afford these payments. Since the short sale fell through this past October we have heard nothing from the lender or the realtor. At this point we would just like to get it all over with, since there is no hope for us to pay off the mortgage or even get it current. What should we do?
BBill, Jan, 2012
Finishing the loan will depend on the anti-deficiency laws in your state. I recommend that you read the article about state anti-deficiency and non-recourse laws. If you will be liable for debt upon the sale or foreclosure of your house, then you will need to negotiate either a payment schedule or a settlement with the lenders.

Given the sums of money involved, it does not seem likely that the lender will just disappear. Another option is to speak to the lender about a loan modification program.