Possibly, but not necessarily. Keep in mind that banks and other lending institutions are essentially debt collectors. While they may try to convince you that they are working in your best interests, they will do whatever is necessary to preserve their bottom line. If you work directly with your lender toward a foreclosure avoidance plan, be cautious of the information you provide. Your lending institution will almost certainly try to obtain as much information as it can about you, all of which could later be used against you in some capacity.

Remember that if you do enter into a foreclosure avoidance plan with your lender, you will absolutely be expected to live up to the agreed upon terms. Be aware of the terms to which you are agreeing; what might at first seem like a fair deal could end up encumbering you with even more long-term debt that you may eventually again struggle to repay. If you do arrive at terms you feel comfortable with and are confident in your ability to abide by them, then such a plan may allow you to keep your home and avoid foreclosure. If, however, you fail to abide by the terms, you will find yourself facing foreclosure once more – potentially with less leniency on the part of your lender.

It is also important to note that many loan modifications are offered on a “trial” basis and may therefore provide only temporary relief for the homeowner. Not all homeowners qualify for long-term loan modifications.

If you are confident that your financial problems are temporary, contacting your lender and working toward a solution such as loan modification may be in your best interests. However, if you wish to start fresh without having the threat of foreclosure or another bad loan hanging over your head, a pre-foreclosure short sale may be a better bet.
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