Avoiding Foreclosure

What To Do

Your first step is to call your lender. If you are having difficulty paying your mortgage on time, it's important to act now before things get so bad that you are facing foreclosure. Your biggest ally if you encounter difficulty paying your mortgage on time is often your lender. Call them as soon as you know you are having problems.

Your lender – also known as a servicer — has a number of options to help you stay in or sell your home. These options include forebearance, repayment plans and loan modifications.

Please use the self-assessment tools provided on MakingHomeAffordable.gov to see if you are among the 7 to 9 million homeowners who may be able to benefit from Making Home Affordable.

There is also the REO Rental Initiative, a temporary rental initiative under which qualified, former owner-occupants and tenants will be offered an option to lease properties in which they reside that have been acquired by Freddie Mac as a result of foreclosure. Check to see if you qualify.

While refinancing is not necessarily a good option when facing foreclosure and can sometimes even be a predatory practice, there are instances where it may help. Talk to your lender to see if refinancing is an option for you.

Talking To Your Lender

Your Mortgage Lender: Your mortgage servicer may have options to help you avoid foreclosure. Look for the telephone number of your mortgage servicer on your mortgage statement or coupon book and call right away.

When you call your lender, be sure to have your account information handy and be ready to give a summary of the financial problems you are having. You should also have recent income statements and your household budget with you.

Be prepared for more than one conversation. Your lender may require that you complete a "loan work-out" package — you may not be eligible for help without it, so complete it as soon as you receive it.

Questions to ask:

  • How much time is the lender willing to give you to complete a work-out?
  • What are your obligations under the work-out package?
  • What are the specifics? Be sure to ask what is due and when.
  • Will a foreclosure sale of your property be put on hold while your lender looks at the possibility of a work-out package?

Visit the Mortgage Bankers Association's Foreclosure Prevention Resource Center for advice on calling your lender for assistance.

Be ready to provide a short explanation of why you are unable to make your mortgage payment.  Did someone lose a job?  Is there a medical emergency? Are you current on your loan but have not been able to refinance into better terms?

You’ll also need to provide your servicer with important information about your property, income, and debt obligations.

Being prepared for this conversation will help your servicer understand your case and see if you qualify for a loan modification or other mortgage workout.

If you need assistance and cannot reach your servicer, you can contact one of the local HUD approved counseling agencies in your area

Housing Counselors

Call the Homeownership Preservation Foundation's Homeowner's HOPETM Hotline at 1-888-995-HOPE to reach trained housing counselors who can provide advice and help you develop a plan.

Call the U.S. Department of Housing & Urban Development (HUD) at 1(800)569-4287 or visit the website for a list of approved housing counselors in Washington.

Reputable Credit Counseling

Do your research; a disreputable counselor can actually do more harm than good.

Call 888-995-HOPE to get help. If you are researching agencies on your own, consider the following:

  • Most HUD-approved housing counseling services are free, so if an agency charges a fee, look very carefully at what type of services you are being charged for.
  • Is it accredited by a recognized accreditation organization?
  • How long has it been in business?
  • Does it have audited financial statements?
  • Does it have community presence? In other words, does it have branches that are open to the public?
  • Does it have the required licenses to do business in the state where you live?
  • Have complaints been filed with the Better Business Bureau in the community where it is located?
  • Does it provide a written "Action Plan" after each counseling session?

You can find a credit counseling agency in your local phone book or by contacting the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern time. You can find a list of HUD-approved agencies in Washington here.

Special Circumstances

Natural Disasters

If your property has been damaged or destroyed by a tropical storm, hurricane, tornado, flood, or other disaster, talk to your lender immediately. They often have special disaster relief options to help you.

Service Members

If you are a service member on or recently released from active duty, talk to your lender about special financial relief options through the Service Members Civil Relief Act (SCRA).

Veterans

The Department of Veterans Affairs has produced a streaming video to provide information to vets facing foreclosure.

Foreclosure Terms

Reinstatement:
Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.
Forbearance:
Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
Repayment Plan:
This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
Loan modification:
This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.
Short Payoff:
If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoff and write off the portion of your mortgage that exceeds the net proceeds from the sale.
Deed-in-lieu of foreclosure:
A Deed-in-lieu of foreclosure is a cancellation of your mortgage if you voluntarily transfer title of your property to your mortgage company. Usually you must try to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. A deed-in-lieu of foreclosure may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.
Assumption:
An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.