Loan modification to avoid foreclosure and bankruptcy

LOAN MODIFICATIONS  Understanding Your Options

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There are many options available to help you to make your payments more affordable or avoid foreclosure. You need to discuss these with your lender, but remember – the earlier you contact them the more options you will have to help you. You may not be eligible for all of these options but you and your lender can determine how best to move forward.

Making Home Affordable Program

The Making Home Affordable Program provides help to homeowners who are struggling to pay their mortgage or anticipating trouble in the future. Find out if you are eligible for assistance through this program.

Workout Options

If the Making Home Affordable Program is not an option for you, there may be other alternatives. By working with your lender you can determine if you are eligible for any of the following workout options, including:

  • Refinance: If you have enough equity in your home, your new mortgage could pay off the old loan along with any late fees and attorney fees. If you decide to pursue a refinance, remember to shop around for the best terms and compare the Annual Percentage Rates.
  • 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. The President’s plan also offers loan modifications through the Home Affordable Modification Program.

Depending on your circumstances it may not be possible to keep your home. But there are still options available to help you avoid the financial and emotional impacts of foreclosure:

  • Short Sale or Short Payoff: In cases where you sell your home for less than you owe, your lender may accept the lesser amount.
  • Deed-in-lieu of foreclosure: Your lender may accept the voluntary transfer of the title of your home back to them in exchange for cancellation of your mortgage debt. This approach may have tax implications for you, and it may not be possible if there are other liens against your home.
  • Note: The Home Affordable Foreclosure Alternatives (HAFA) initiative, a component of the Making Home Affordable Program, offers both short-sale and deed-in-lieu options.Learn more about HAFA and eligibility requirements.
  • Assumption: This option permits a qualified buyer to take over your mortgage debt and the mortgage payments, even if the mortgage was originally non-assumable.

Be aware that some workout options affect your credit rating more than others and you should discuss all potential impacts with your lender. You may also visit for more information about your credit and how alternatives to foreclosure may affect it.

Don’t Give Up!

It is important you understand what foreclosure means and why it is so important to get help early to avoid it. The impacts of foreclosure are significant – including potential loss of equity in your home and the negative hit to your credit score. The emotional impacts are considerable as well – for you and your family.

For these reasons and more, be sure that you and your lender explore all options to foreclosure and don’t give up!