Below are some of the foreclosure prevention options that your lender may offer you. As your counselor works with you and your lender, it is important that you provide all the documents on the Document Checklist in the Intake Packet to help your counselor understand the details of your situation and help guide you toward the best solution. Once your lender offers you a workout plan, your counselor can review the documents with you to help you understand if it is a solution that will help you.
If your problem is temporary:
• Reinstatement: If you are behind in your payments lenders are generally willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
• Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. You may qualify for this if you have recently experienced a loss of income or some other emergency situation, but can show you will be able to make payments.
• Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.
If it appears that your situation is long-term and you cannot afford your mortgage payments and cannot bring your account current:
• Mortgage modification: If you can make payments on your loan, but don’t have enough money to bring your account current or you can’t afford your current payment, you should try to get your lender to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
- Adding the missed payments to the existing loan balance.
- Reducing the interest rate, including making an adjustable rate into a fixed rate.
- Extending the number of years you have to repay.
- Reducing the principal.
• Short Sale: If you can no longer afford your home and the lender will not agree to modify your mortgage you may need to sell your house. If you cannot sell it for the full amount of the money you owe on your mortgage, you can request that the lender accept less than the amount owed. You have to get the lender to agree to this – you cannot just sell the house and expect the lender to accept whatever money you get for the house.
• Deed In Lieu of Foreclosure: If you are unable to sell your house and cannot afford the mortgage you can try to “give back” your house to the lender in exchange for the lender forgiving your debt. This will not save your house, but it is less damaging to your credit rating than foreclosure. The lender must agree to this.
