A lot of folks these days think they own one of those cards. Their answer to not being able to (or not wanting to) make their house payment is "I'll just give the house back to the lender." 

It's not that easy.  In fact, going through a foreclosure or  "short sale" can have a serious impact on someone's financial life today and many years to come. 

 There isn't room to explain the foreclosure or short sale process here except in the most basic of terms.  During a foreclosure the borrower stops making payments as agreed, the lender exercises his rights under the loan documents, in Colorado the house is sold by the public trustee to the highest bidder. 

 During a short sale, the borrower finds a buyer who will pay an amount less than what's owed.  The lender accepts the "short" sale.  For those who can show hardship and are unable to make their payments, the short sale is preferable to the foreclosure.  It’s less impactful on credit. 

 In both cases, the lender decides what he's going to do about the difference between the amount received and the amount owed by the borrower. 

 Among the lender's options if they get less than owed (a deficiency) are: do nothing, settle with the borrower for less than the deficiency or get a deficiency judgement establishing that the borrower still owes some money. 

First, don't count on the "do nothing" option.  All three of the options mean bad things for the borrowers credit, in some cases extending the time to borrow to buy another home for a number of years.  Add to the second two options bad credit and the continued pursuit by the lender or by a collection agency. This can involve wage garnishment and other general misery. 

 The consequences are much more onerous than many expect.  Many wish they would have worked harder for other solutions.  Those solutions exist, but there's work involved. 

First, your lender needs to know your situation. No matter how hard it is to find the right person to talk to, keep calling, and keep track of all of your calls and conversations.  When you talk to a person, ask about your options to avoid a foreclosure. Don't be embarrassed, keep a good attitude, don't get upset, you're trying to save your financial life. 

 Call the foreclosure prevention hot line at 1-800-569-4287.  They can help you with advice and options.  Call an attorney who specializes in foreclosures.  Paul Murphy at 471-3389 comes to mind. 

 Change your lifestyle till you can make your payment.  Only you know what that means.  Sell the extra car, stop going out to dinner, pack your lunch, cancel your cable TV (it's not a necessity), quit smoking, sell your ATV or other assets. You or your spouse get a job or a second job. Create a budget.  It's so very important. 

 Why so important?  Losing your credit means no place to go in an emergency.  It means no way to own a home again for a long time.  It will increase the cost of credit for a house, car, anything in the future.  It's worth every effort on your part.

While you're negotiating, stay in the house, and take good care of it.  If you do eventually lose it, the higher its value the lower your potential deficiency.  Among the felony stupid acts I hear about are borrowers trashing the house, or stealing appliances, etc., and shooting themselves right in the foot. 

 Do everything you can to keep your house.  When the market comes back (and it will) your value will again exceed your loan.  Your credit will be intact so you can use it for all the good things credit can do for you.  Hang in there.

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