Falling behind does not have to end in foreclosure. Servicers are required to evaluate borrowers for loss-mitigation options, and most foreclosures that get stopped are stopped by one of the options below. The rules of thumb: apply early, submit a complete application, and stay in contact — a complete application submitted at least 37 days before a scheduled sale generally must be evaluated before the sale can proceed.
1. Reinstatement
Pay everything you owe — arrears, late fees and foreclosure costs — in one lump sum before the deadline, and the loan returns to normal as if nothing happened. Fits borrowers whose hardship was temporary and who can access funds (savings, family, a tax refund).
2. Repayment plan
The servicer spreads the arrears over several months added to your regular payment. Fits a short, resolved hardship where your income is back but you cannot pay a lump sum.
3. Forbearance
Payments are reduced or paused for a set period (often 3–12 months). The missed amounts are not forgiven — they are repaid later through a plan, a modification, or a lump sum. Common after job loss, illness or a natural disaster.
4. Loan modification
A permanent change to the loan: the servicer may extend the term (up to 40 years on some programs), reduce the interest rate, capitalize the arrears into the balance, or — rarely — reduce principal. FHA, VA, USDA and Fannie Mae/Freddie Mac each have their own modification programs (for example, FHA’s loss-mitigation options and the Flex Modification). You typically complete a trial payment plan of about three months first.
5. Refinance
A new loan pays off the old one. Hard once credit is damaged, but possible early in a delinquency or through specific programs. Watch closing costs and reset terms carefully.
6. Short sale
You sell the home for less than you owe, with the lender’s written approval, and the lender accepts the proceeds as settlement (sometimes waiving the deficiency; get that in writing). Less damaging to credit than a foreclosure and you leave on a planned timeline rather than through eviction.
7. Deed in lieu of foreclosure
You voluntarily transfer the deed to the lender and walk away, in exchange for release from the loan (again — get the deficiency waiver in writing). Usually requires the property to have been marketed first and to be free of other liens.
8. Bankruptcy
Filing triggers an automatic stay that pauses foreclosure. Chapter 7 may buy a few months; Chapter 13 lets you cure arrears through a 3–5 year court-supervised plan while keeping the home. It is a major legal step with lasting credit effects — consult a bankruptcy attorney.
How to apply — and avoid the traps
- Ask the servicer for its loss-mitigation application and a list of required documents; submit everything and confirm receipt.
- Ask for a single point of contact and keep a log of every call.
- Never stop paying because an application is “pending” unless the servicer tells you in writing to do so.
- Free help: HUD-approved counselors at 1-800-569-4287. Anyone demanding upfront fees to “save your home” is a red flag — in most cases charging such fees is illegal.