2026 Comparison Guide
Foreclosure Alternatives Compared: Which Option Saves the Most Equity in California?
If you're facing foreclosure in California, you have seven distinct options. They're not all equal. Some preserve 100% of your equity, others preserve none.
The short answer: AB 2424 market sales preserve 90-97% of your equity, making them the best option for most California homeowners with significant home value. But your situation may call for a different approach.
The Complete Comparison: All 7 Options Ranked
| Option | Keep Home? | Credit Impact | Equity Preserved | Time Required | Best For |
|---|---|---|---|---|---|
| 1. Reinstatement | ✅ Yes | Low | 100% | Days | Temporary hardship resolved |
| 2. Loan Modification | ✅ Yes | Low-Medium | 100%* | 60-120 days | Long-term payment struggle |
| 3. Forbearance | ✅ Yes | Low-Medium | 100%* | 30-90 days | Short-term hardship |
| 4. AB 2424 Market Sale | ❌ No | Medium | 90-97% | 60-90 days | Significant equity to protect |
| 5. Short Sale | ❌ No | Medium-High | 0% | 90-180 days | Underwater mortgage |
| 6. Deed in Lieu | ❌ No | High | 0% | 30-60 days | No other options, minimal equity |
| 7. Foreclosure | ❌ No | Severe | 0% | Varies | Last resort only |
*Equity preserved assuming you can maintain payments going forward
Feeling Overwhelmed by Choices?
Seven options is a lot to process. Most homeowners I work with feel the same way at first. A quick conversation can help narrow it down to the 1-2 options that actually fit your situation.
Let's Narrow It Down Together15-minute call. No pressure. No judgment.
1
Reinstatement
100% Equity Preserved
What It Is: Pay all missed payments, late fees, and legal costs to bring your loan current.
The Numbers
- Typical cost: $15,000-$50,000+ depending on how far behind you are
- Timeline: Can be done in days once funds are available
- Credit impact: Only the late payments already reported; no foreclosure
✅ When This Works
- You had a temporary hardship (job loss, medical emergency) that's now resolved
- You have access to funds (savings, family loan, 401k withdrawal)
- You want to keep your home AND can afford ongoing payments
❌ When This Doesn't Work
- You can't afford the monthly payment even after catching up
- You don't have access to the reinstatement amount
- The underlying financial problem hasn't been solved
My Take: Reinstatement is ideal if you had a temporary setback but are now financially stable. Don't reinstate just to delay the inevitable. You'll burn through funds you could have kept.
2
Loan Modification
100% Equity Preserved*
What It Is: Negotiate new loan terms with your lender (lower interest rate, extended term, or principal reduction) to create an affordable payment.
The Numbers
- Cost: Usually no upfront cost (some attorneys charge for assistance)
- Timeline: 60-120 days for approval + 3-month trial period
- Payment reduction: Varies; 10-30% reduction is common
✅ When This Works
- You can afford a reduced payment but not your current payment
- You had a documented hardship
- You haven't had a recent modification
- Your income supports a modified payment
❌ When This Doesn't Work
- You can't afford any reasonable payment amount
- You've already had multiple modifications
- Your income is too low OR too high to qualify
- You'd rather sell and move on
California Advantage: Under the Homeowner Bill of Rights, your servicer can't foreclose while reviewing a complete modification application. This buys time while you explore options.
3
Forbearance
100% Equity Preserved*
What It Is: Temporarily pause or reduce your mortgage payments, with a plan to catch up later.
The Numbers
- Cost: None during forbearance; payments due afterward
- Timeline: Typically 3-12 months depending on program
- Monthly savings: 50-100% of payment during forbearance period
✅ When This Works
- You have a temporary hardship with a clear end date
- You'll be able to resume payments AND catch up afterward
- You want to keep your home long-term
❌ When This Doesn't Work
- Your hardship is permanent
- You won't be able to catch up after forbearance ends
- You'd rather sell than stay
AB 238 Wildfire Relief: California law provides up to 12 months of forbearance for homeowners affected by the January 2025 LA wildfires, with protections against credit damage during the forbearance period.
4
AB 2424 Market Sale
90-97% Equity Preserved
What It Is: List your home with a licensed real estate broker, trigger AB 2424's 90-day postponement, and sell at full market value instead of losing equity at auction.
The Numbers
- Cost: 5-6% commission + closing costs (paid from sale proceeds)
- Timeline: 60-90 days from listing to close
- Equity preserved: 90-97% of your home's value after selling costs
Real Example (Los Angeles Home)
| Scenario | Sale Price | Costs | Your Equity |
|---|---|---|---|
| Market Sale | $900,000 | ~$55,000 | ~$445,000* |
| Cash Buyer | $540,000 | ~$0 | ~$140,000* |
| Foreclosure Auction | Variable | $0 | $0-Unknown |
*Assuming $400,000 mortgage balance
✅ When This Works
- You have significant equity (most LA/OC homeowners do)
- You're willing to sell and move
- You have at least 5 business days before your scheduled auction
- Your home is in sellable condition (doesn't have to be perfect)
❌ When This Doesn't Work
- Your auction is in less than 5 business days (AB 2424 deadline passed)
- You're underwater (owe more than the home is worth)
- You want to keep your home
Why This Is Often the Best Option: For homeowners with equity, AB 2424 market sales capture 30-50% more than cash buyer offers and infinitely more than foreclosure (where you get nothing). The 90-day postponement gives you time to market properly and get competitive offers.
👉 Full guide: Sell Your House Before Foreclosure: Why Cash Buyers Offer 50-70% When You Deserve 100%
Wondering if AB 2424 Applies to You?
Every home and timeline is different. I can help you figure out if an AB 2424 market sale is your best path, or if another option makes more sense given your specific situation.
Let's Look at Your TimelineConfidential conversation. No obligation.
5
Short Sale
0% Equity Preserved
What It Is: Sell your home for less than you owe, with your lender agreeing to accept the reduced payoff.
The Numbers
- Cost: Usually no out-of-pocket cost; lender absorbs the loss
- Timeline: 90-180 days (lender approval takes time)
- Equity preserved: $0 (you owe more than the home is worth)
✅ When This Works
- You're underwater (negative equity)
- You can't afford payments and don't qualify for modification
- You want to avoid foreclosure's more severe credit impact
- Your lender agrees to the short sale terms
❌ When This Doesn't Work
- You have equity (market sale preserves it; short sale doesn't)
- Your lender won't approve the short sale
- You don't have time for the lengthy approval process
- You have junior liens that complicate the transaction
California Advantage: For most purchase-money mortgages, California's anti-deficiency laws (CCP 580b, 580e) protect you from owing the lender the difference after a short sale. However, refinanced loans and HELOCs may not have this protection.
6
Deed in Lieu of Foreclosure
0% Equity Preserved
What It Is: Voluntarily transfer your home to the lender in exchange for release from your mortgage obligation.
The Numbers
- Cost: None (you simply sign over the property)
- Timeline: 30-60 days for lender approval
- Equity preserved: $0
✅ When This Works
- You have no equity or minimal equity
- You want to avoid the foreclosure process
- You've been unable to sell (even short sale)
- Your lender agrees to accept the deed
- You have no junior liens
❌ When This Doesn't Work
- You have equity (you'd be giving away money)
- You have second mortgages or liens (lender may not accept)
- You want to try selling first
My Take: Deed in lieu is essentially voluntarily giving up your home. Only consider this if you have no equity to protect and other options have failed.
7
Foreclosure
0% Equity + Maximum Credit Damage
What It Is: The lender completes the foreclosure process and takes your home at auction.
The Numbers
- Cost to you: Loss of any equity + severe credit damage
- Timeline: 6-9 months from missed payment to auction
- Credit impact: 100-150+ point drop; stays on credit 7 years
When This Might Be Your Only Option
- All other options have been exhausted or denied
- You've accepted that losing the home is inevitable
- You have no equity to protect
- You've run out of time for alternatives
When to Explore Other Options
- You have equity (use AB 2424 to sell at market value)
- You can afford a modified payment
- You have time for alternatives
- You want to minimize credit damage
Important: Even if foreclosure seems inevitable, acting earlier gives you more options. Waiting until the last minute closes doors that could have remained open.
Decision Framework: Which Option Is Right for You?
Start Here: Do You Want to Keep Your Home?
✅ YES, I want to keep my home:
- Can you catch up on all missed payments? → Reinstatement
- Can you afford a reduced payment? → Loan Modification
- Is your hardship temporary with a clear end date? → Forbearance
- Are you facing wildfire-related hardship? → AB 238 Forbearance
❌ NO, I'm willing to sell:
- Do you have equity in your home? → AB 2424 Market Sale (BEST)
- Are you underwater (owe more than home is worth)? → Short Sale
- Have you tried everything else? → Deed in Lieu
🤷 I don't know what to do:
That's completely normal. Most people facing foreclosure feel this way. You don't have to figure it out alone.
A HUD-approved housing counselor (free) or a local real estate professional who understands foreclosure options can help you sort through what makes sense for your specific situation.
Help Me Figure This OutNo pressure. Just clarity.
Frequently Asked Questions
Which option has the least credit impact?
Reinstatement (if you've only had late payments) or loan modification (no foreclosure reported). Market sales under AB 2424 have moderate impact, less than foreclosure but more than keeping the loan current.
Can I use multiple options?
Yes. Many homeowners try loan modification first, and if denied, pivot to an AB 2424 market sale. The key is not waiting too long between attempts.
What if I don't know how much equity I have?
Get a professional market analysis from a local real estate agent (free) or check sites like Zillow/Redfin for estimates. Compare to your current loan balance(s) to estimate equity.
How do I know if I qualify for loan modification?
Submit a complete application to your servicer. Generally, you need documented hardship, ability to afford a modified payment, and you can't have defaulted on recent modifications.
Is it ever too late to do an AB 2424 market sale?
If your auction is scheduled within 5 business days, you may have missed the AB 2424 deadline. However, other postponement options (bankruptcy, loan modification application) might still be available.
You're Not Alone in This
Each of these alternatives comes with different trade-offs. The earlier we connect, the more paths we can explore together. If you're facing foreclosure in Los Angeles or Orange County and want help determining which option fits your situation, I'm here to help.
Let's Talk Through Your SituationConfidential conversation. No pressure. No judgment.
Disclaimer: This article provides general information about foreclosure alternatives and is not legal or financial advice. Every situation is different. Consult with qualified professionals (attorney, financial advisor, housing counselor) before making decisions about your specific circumstances.
