Can I Refinance My House During a Foreclosure Process?

I received an email yesterday from a homeowner who is facing foreclosure due to default. This is a common question among homeowners right now, so I thought it best to respond in a public (but anonymous) way. Here is the crux of the question:

Is there any way I can refinance my house while in the foreclosure process? I have heard that refinancing is a good way to avoid being foreclosed on. Any advice?

I'm sorry to report that you've been misinformed. Or perhaps you've misheard what somebody was telling you. At any rate, it's very rare to get qualified for a mortgage refinance while in foreclosure, and for one simple reason. Lenders will view you as a huge risk.

In the current economy, I would go so far as saying it's virtually impossible to refinance when being foreclosed on. It's unlikely at any time, but especially right now. That's because the government is encouraging lenders to focus their refinancing efforts on homeowners who are current on their mortgage payments. For those homeowners who have fallen behind on their payments, the focus is on modifying the home loans -- not refinancing.

We recently posted an article on the Homeowner Affordability and Stability Plan, which is what I've just described above. So I recommend reading that article, for starters.

If you are truly in default on your current loan, you should see if you qualify for a mortgage modification. Read the article I linked to above, and you'll find out how to measure your eligibility for this program. I seriously doubt you'll be able to refinance while in foreclosure, but there's a good chance you can qualify for a modification to lower your payments for a period of time.

Learn More About Refinancing and Modifications

We have a section of our website dedicated to mortgage refinancing. So if you'd like to learn more about this subject, that's a good place to start. We also have plenty of information related to the government's assistance programs, modifications and the like. Here are some links to get you started:

• The Refinancing Section of Our Website
• Obama Announces Mortgage Relief Plan
• How Do Home Loan Modifications Work?
• Lenders Who Offer Modification Programs

Let me close by saying there are exceptions to every rule. So don't base your decisions solely on the information I've provided. You need to continue your research beyond this website, and you should start by talking to your lender about your options.