Mortgage Foreclosure

Mortgage Payment Options

Generally, housing lenders do not want to foreclose on a mortgage. There are rarely winners in foreclosure because of the costs involved. Try to work out a payment plan with your lender until you are better off financially.

The key is to ask for help early and persistently and get advice from a state-approved housing counselor. They can help you understand your mortgage documents, explain the options you have and help you negotiate a “Workout Plan” with your lender.

Come to the appointment prepared with settlement paperwork, tax returns and any notices or invoices from your lender, along with your household budget and list of creditors.

Possible Workout Plans could include:

• Repayment Plan – Catch up by adding a portion of the past due amount to your monthly payments.
• Forbearance Plan – Your monthly payments are temporarily reduced or suspended. There is usually a higher amount due when the payments reinstate.
• Loan Modification Plan – The lender agrees to change your terms in some way. They might reduce your interest, extend the loan payment period or negotiate the prepayment penalty.
• Partial Claim – The lender may offer a low-interest or interest-free loan through the insurer (FHA or private mortgage insurance) to catch up on the arrearage. There may be small monthly payments. The loan is due when you sell the property or when you pay off your first mortgage.
• Recast Plan (not available with Fannie Mae or Freddie Mac) – You put missed payments at the back end of the loan.

If your lender rejects your proposal, try to negotiate and find out what they might be willing to accept. If it seems unreasonable or unfair, ask to speak with a loss mitigation specialist or supervisor. Though a housing counselor can be a great help, you need to act as your advocate. Even if foreclosure is inevitable, you can still negotiate better terms or an extended timeline so that you aren’t out in the cold. Be ready to keep fighting!