Below you will find several alternatives or "work-out solutions" that you may explore with your lender:
- First and foremost, if you can keep your mortgage current, do so.
- But if you find you are unable to make your mortgage payments, you might qualify for a loan workout option.
- Check with your lender to see which option may be available. Some of these options may not apply to your loan if it is not insured by Federal Home Administration (FHA).
If your problem is temporary – call your lender to discuss these possibilities:
- Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
- Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement or tax refund.
- Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.
If it appears that your situation is long-term or will permanently affect your ability to bring your account current - call your lender to discuss options:
- Mortgage modification: If you can make payments on your loan, but don't have enough money to bring your account current or you can't afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
- Adding the missed payments to the existing loan balance
- Changing the interest rate, including making an adjustable rate into a fixed rate.
- Extending the number of years you have to repay.
- Partial Claim: If your mortgage is FHA insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan. You qualify for an FHA partial claim if:
- Your loan is between 4 and 12 months delinquent.
- You are able to begin making full mortgage payments again.
When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full.
The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.
If keeping your home is not an option - call your lender to discuss these possibilities:
- Sale: If you can no longer afford your home, your lender will usually give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property.
- Pre-foreclosure sale or "short sale": If you can't sell the property for the full amount of the loan, your lender may accept less than the amount owed. You may qualify if:
- The loan is at least 2 months delinquent
- You (or your real estate professional) can sell the house within 3 to 5 months
- A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines
- Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable.
- Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations:
- You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option.
- This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens.
Resources for finding a real estate agent and selling your home
If you need to sell your home, you'll have to answer many questions. You'll need to find how much your house is actually worth, and you'll have to find a real estate agent you are comfortable with. The following resources may help:
- National Association of Realtors
- National Association of Real Estate Brokers
- International Real Estate Digest
- National Association of Hispanic Real Estate Professionals