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If you are having trouble making your mortgage payments, or you expect to have trouble soon - it’s important to contact your lender or loan servicer right way. Your loan servicer is the company that processes your mortgage payments for your lender.
The best solution (sometimes called a “workout plan") will depend on the homeowner's situation. Possible foreclosure prevention options include:
- Repayment plan: The lender may add an additional amount of money to the regular monthly payment to make up the past-due amount, or missed payments may be added to the loan balance.
- Forbearance: A formal agreement with the lender under which mortgage payments are reduced or suspended for an agreed upon period. At the end of that period, the homeowner resumes regular payments, and brings the loan current through a lump sum payment or additional partial payments over a number of months (unless the loan has also been modified to make this unnecessary).
- Loan modification: Involves permanently changing the mortgage to make the payments more manageable. Modifications include lowering the interest rate, extending the term of the loan, adding missed payments to the loan balance, or as a last resort, reducing the principal amount of the loan.
Most lenders will not stop the foreclosure process once it has begun. The lender will stop the process once a workout solution is fully in place and receiving the agreed upon payments from the homeowner.
Mortgages through the Federal Housing Administration (FHA) and Veterans Administration (VA) may offer different or additional foreclosure alternatives. For example, an FHA borrower may be eligible for a one-time payment from the FHA insurance fund to the lender to bring the mortgage current. The borrower is responsible for repaying the “partial claim” when they pay off the mortgage or sell the property. A repayment plan may be a good remedy for someone who has to make up only one missed payment. A loan modification may be necessary for someone facing a long-term reduction in income.
Here are some suggestions for talking with your lender or loan servicer about the options they may be able to offer:
- Open and read all mail from your lender or loan servicer. The phone number to call to reach your lender or loan servicer will be printed on your mortgage statement or on a letter from your lender.
- Have your loan number available so your lender or loan servicer can look up your account. Your loan number also will be on your mortgage statement.
- Be prepared to answer questions about why you have missed (or expect to miss) mortgage payments. You may be asked to provide this information in the form of a letter (often called a “hardship letter”). If you need assistance in writing a hardship letter, contact a housing counselor.
- Be prepared with information on your monthly household income and expenses by completing a budget worksheet. Your loan servicer may do a financial assessment to find out what workout options are available to you. You may be asked to send documentation like pay stubs or income tax forms.
- Be prepared with information on your savings. If you do not have money saved, be prepared to explain to your lender or loan servicer how and when you will be able to contribute money toward your loan workout.
- Write down the date and time of the call, who you talked to, and what the loan servicing representative told you.
- If you are not yet late on your payments, a Customer Service Representative may be able to assist you.
- If you are already late on your payments (or if the Customer Service Representative can not help), ask to speak with the “Loss Mitigation” department. This is the department that can talk to you about possible workout options. Get a phone number for the person you talk with in the Loss Mitigation department, so you can call that person back directly.
- Tell the loan servicing representative about your situation and that you want to work with them to bring (or keep) your mortgage current. Answer all the lender’s questions honestly, and be prepared to fax or mail any financial documentation they request as soon as possible.
- Ask what workout options are available to you. Get any proposed workout plan sent to you in writing before you agree to it. Make sure you can really afford a workout plan before you agree to it.
- If you have questions or want a second opinion, contact a HUD-approved housing counselor
 for free advice.
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