Borrowers who cannot make required payments on their home loans may not always like their options, but they do have options. Here are the primary ones:

A lender may be willing to lower the interest rate, extend the time for payment, or make other changes to a loan. Colorado law requires loan modification agreements to be in writing; borrowers should not rely on statements made by lenders over the phone. The best approach for a borrower dealing with a lender’s “workout” department is to be persistent, keep careful documentation, and have a realistic expectation about the outcome. If possible, borrowers should send confirmatory e-mails or faxes to lender representatives (even if the representatives never respond). Because working with lenders is time-consuming and often fruitless, it may not be practical for a borrower to hire an attorney for the work (at least until the paperwork is ready for review). There are many organizations offering to help with loan workouts, but they are often not reputable; borrowers may be best off working on loan modifications themselves.

In a “short sale,” the lender permits the borrower to sell his home for less than the amount of the loan (because the amount due on the loan is more than the home is worth in the current market). The lender is likely to require that the borrower remain personally liable for the shortfall. A good real estate broker can be invaluable in putting the short sale package together. Short sales always require lender approval, so the borrower and his real estate broker should seek lender cooperation early in the process. An attorney could be helpful to review the final paperwork from the lender.

“Deed-in-lieu of foreclosure” is not common, but sometimes a lender will agree to take a deed to the property from a debtor in return for releasing the debt. Most large lenders are leery of deeds-in-lieu because they don’t want to own more real estate. When the property is in good condition and there are no junior liens, this approach may work. A deed-in-lieu can be less damaging to a borrower’s credit than foreclosure.

Personal bankruptcy may result in a borrower being able to keep his home, but it is generally considered an option of last resort because of its significant consequences. Bankruptcy should only be pursued after careful consideration with an attorney specializing in bankruptcy law.

There are a number of state and federal laws giving a borrower the right to pursue their lender for unfair or fraudulent practices. The borrower’s primary goal in lender liability cases is to recover damages. Some borrowers try to use lender liability claims as a way of forcing lenders to renegotiate loans, but this is only likely to be successful if the borrower’s claims are reasonable and credible. An aggrieved borrower should consult an attorney to discuss his specific facts.

Foreclosure is a complicated process, and the foreclosing lender must cross the t’s and dot the i’s. A lender’s failure to comply strictly with the law may cause the foreclosure to be delayed or dismissed; this may, in turn, give the homeowner extra time to try to sell the home or find other funds to cure the default. Fighting a lender can be costly, but when the lender hasn’t followed the rules, it may be an effective approach.A distressed borrower should assess his situation honestly, consider the options, make a plan, and pursue the plan diligently. Taking action early is always best. Noah Klug is an attorney with the Breckenridge law firm of Bauer & Burns, P.C. He may be reached at (970) 453-2734, or Noah@BreckenridgeLawyer.com. This article is intended as a general overview; consult an attorney for advice on your particular situation.