Alternatives Before Auction

• Foreclosures end with an auction that either awards the house to the highest bidder or gives possession of it to the lender. However, there are usually several months before this action where the foreclosure is progressing. During this time, borrowers can negotiate with their lenders to redeem their mortgages, seeking a loan modification, restructuring or settlement that satisfies both parties. Although borrowers will have to pay late fees, this is the best way to stop a foreclosure and reduce the negative credit effects it creates.
  
  

Redemption Period

• The redemption period is a period of time after the foreclosure is finished where the borrower can still get the house back, under specific conditions. Redemption periods are decided based on the state: Some states allow them while others do not. The time frame can also vary. Some states have redemption periods that can last a month or longer, while others only offer the option for several days after the auction or sale.
  
  

Redemption Considerations

• A redemption does give the borrower one last chance to get the house back, but it can be difficult. A redemption can typically only be completed if the borrower is able to pay back the entire mortgage debt. This is often very difficult for borrowers and can put an unnecessary strain on finances. Also, redemption periods may not apply to all foreclosures. In some states, a redemption is only allowed if the foreclosure is conducted by a government agency to collect on debt.
  
  

Deficiency Balance

• A deficiency balance is the amount of debt still owed even after a foreclosure. It is common that a foreclosure sale will not generate enough money to pay off all the debt if the housing market has fallen from the time the home was purchased. In most cases, lenders do not have the ability to seek out payment of this extra debt on the original mortgage. But in some states, original lenders and, more often, lenders of second mortgages have the ability to file lawsuits for unpaid debts even after the foreclosure.