Forbearance, Short Sale, and Other Options

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  • When faced with possible foreclosure, the most important thing you can do is talk to your lender.
  • There are several ways to avoid foreclosure, including ones that let you stay in your home.
  • If you need help navigating your loss mitigation options, you can speak to a HUD-approved housing consultant for free.

Going through foreclosure means losing your home, taking a major credit hit, and being unable to get another mortgage for several years. But just because you missed some mortgage payments doesn’t mean foreclosure is inevitable.

If you’re facing foreclosure, you have options to stop it.

What is foreclosure?

Foreclosure is the process a mortgage lender or administrator uses to take possession of a home when a borrower stops making payments. When a house goes into foreclosure, it is auctioned off.

According to the U.S. Department of Housing and Urban Development, lenders typically start foreclosure proceedings between three and six months after your first missed payment.

Once the foreclosure process is complete and your home has been sold, you will be forced to vacate the property and your credit score will take a massive hit – if you have good credit, a foreclosure could see it drop 100 points or more.

Talk to your lender as soon as possible

The number one thing you can do when faced with a possible foreclosure is to keep lines of communication open with your lender.

“The first thing you should know about avoiding foreclosure is that you should let your lender know as soon as you face financial difficulties that could cause you to miss payments,” says Andrew Latham, CFP and senior editor from “If you can’t make your mortgage payments, ask what your options are.”

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Lenders are generally willing to work with a borrower who is unable to keep up with their payments, as it is often cheaper than going through foreclosure proceedings.

Ways to prevent foreclosure

If you’re unable to make your monthly mortgage payments, you have a few options that can save you from losing your home to foreclosure and taking a big hit on your credit score.

Some of the options listed here allow you to stay in your home while others require you to sell or give up your home.

Which one is right for you depends on the nature of your situation. If you’re going through a temporary financial setback, forbearance or a payback plan for your missed payments might be the best way to go. If your situation is more permanent, you can ask for a loan modification.


Forbearance will temporarily stop or reduce your monthly payments if you face short-term financial distress. This can be a job loss, natural disaster or illness.

Temporarily suspending your mortgage payments can give you time to find a new source of income or get back on your feet financially.

They will work with your lender to determine the terms of the forbearance, including by how much and for how long your payments will be reduced.

After the grace period has expired, you must repay any missed payments. You have a few ways you can do this:

  • Have the amount you owe added to your next mortgage paymentswhereby the repayment is spread over several months.
  • Let the missed payments count toward the end of your mortgage. This is known as deferral.
  • Pay the amount in one lump sum. Lenders can’t usually require you to pay the amount incurred during your forbearance all at once, but it’s an option.

repayment schedule

A repayment plan can help you get back on track if you’ve missed some mortgage payments but can now afford your regular monthly payment.

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You work with your lender to create a repayment plan that works for you. The amount you owe is spread over a certain number of months and added to your monthly payments.

Loan Modification

If you’re in a longer-term emergency and can’t make your regular mortgage payments, ask your lender about a loan modification.

A loan modification changes the terms of your original mortgage to make it more affordable. This may include extending the loan term or lowering the interest rate.

Refinance your mortgage

If you haven’t missed a mortgage payment yet but think you might have problems in the near future, consider whether refinancing could lower your monthly payments.

Mortgage rates are relatively high right now, but if you refinance to a longer term, you could still potentially lower your payment enough to bring it to a more affordable level. However, remember that refinancing comes with closing costs.

Sell ​​your house

If you are not eligible for any of the loss mitigation options that allow you to keep your home, selling your home on your own terms might be the best option rather than having it sold at foreclosure.

Work with a real estate agent to determine how much you could likely sell your home for. If the value of your home exceeds the amount you owe on your mortgage, you should be able to pay your mortgage in full when you sell it. You may even have extra money to help you find a new apartment.

short sale

If the proceeds from your home sale don’t cover the full amount you owe on your mortgage, you can ask your lender if you qualify for a short sale.

In a short sale, the proceeds from the sale of the home are insufficient to pay off the mortgage in full, so the lender agrees to accept less than the full balance and waive the balance.

With this option, you may even be eligible for relocation assistance from the lender.

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deed instead of foreclosure

If you can’t sell your home, you may be eligible for a deed in lieu of foreclosure.

With this option, you give ownership of your home to the lender, and in return, the lender relieves you of your obligation to pay the mortgage.

As with a short sale, you may be able to get relocation assistance from your lender with a deed instead of foreclosure.

Where can I get help with foreclosure?

HUD-sponsored housing counseling agencies offer free advice on how to deal with a possible foreclosure. You can search online for an advisor in your area. You can also call the HOPE hotline at (888) 995-4673 to be connected to a HUD-approved counselor.

Foreclosure attorneys can also help you if your situation is more complex or you need help understanding your options.

But beware of scams. Many scammers take advantage of homeowners facing foreclosure, so be careful who you turn to for help.

Remember, foreclosure prevention advice is available free of charge from HUD-approved agencies. Avoid unscrupulous companies that will help you get a loan modification or ask you to sign your deed for them.

When is it too late to stop a foreclosure?

“Your last chance to avoid foreclosure depends on where you live, since foreclosure laws vary from state to state,” Latham says. “In California, for example, you have up to five days before the foreclosure sale of your property to fix the default and stop the foreclosure.”

Research if your state has guidance or educational resources on its foreclosure laws and how homeowners can stop foreclosure proceedings. Your state attorney general’s office may have this information.

Depending on your state’s laws, you may have up to the auction date to stop a foreclosure. But the longer you wait, the harder it gets. Because of this, it’s important to let your lender know as soon as you anticipate a missed payment.


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