Once you contact your lender and let them know that you want to stay in your home, there are several alternatives that your lender may consider. These alternatives are also called a “mortgage workout.” Types of workouts include:

Skipping one payment. Your lender may allow you to skip one mortgage payment, otherwise known as letting you remain “30 days down” on your loan.

Extending the grace period for late payments.

Special forebearance. This is a situation where your lender arranges a temporary repayment plan that could include a reduction or suspension in your mortgage payment. This option is typically only in cases where a borrower has experienced a significant drop in income or increase in expenses. Your lender will require you to provide evidence of your new financial situation and your ability to repay under a temporary change in mortgage payment.

Mortgage modification. In this case your lender will consider allowing you to refinance or extend the term of your mortgage loan.

Permanent Loan Restructuring. If it’s clear that you want to stay in the home, are willing to pay back on the mortgage, but that you will not be able to repay the loan as it currently stands, your lender may be wiling to permanently restructure the loan. Ways that they may do that include:

• Rolling your delinquent payments into your present balance and re-amortizing the loan (meaning to recalculate the principal and interest) so that you’re able to pay your delinquent payments slowly over the life of the loan.
• Giving you time (often over a period of several years) to repay the delinquent payments in installments with no interest.
• Lowering the loan’s interest rate temporarily or permanently over the life of the loan, reducing your monthly mortgage payment without lengthening the term of the loan.
• Substituting other property as collateral for the mortgage such as jewelry, other property, etc. instead of your home so that you will be at risk for losing that possession/asset instead of seeing your home go into foreclosure.

Some combination of any of the above methods, such as temporarily reducing the interest rate, lengthening the term of your loan and creating a payment plan to repay the delinquent payments over time at no interest.

Partial claim.

• If you have a HUD/FHA loan you may be able to obtain a one-time payment from the FHA-insurance fund to make you current on your home. You may qualify if:
• Your loan is at least 4 months delinquent but not more than 12 months delinquent
• You are able to begin making full mortgage payments

When you file a partial claim, HUD will pay the amount to make your mortgage current. You will sign a promissory note promising to repay the loan amount and a lien will be put on your home until the note is paid in full. The note is interest-free and due when you pay off the first mortgage or sell the property.

Pre-foreclosure sale. A pre-foreclosure sale allows you to avoid foreclosure by selling the home for an amount less than the total mortgage loan. You may qualify for a pre-foreclosure sale if:

• the loan is at least 2 months delinquent
• you are able to sell your home within 3-5 months and
• a new appraisal from your lender shows that your home’s value meets HUD program guidelines.

Deed-in-lieu of foreclosure. Also known as a “friendly foreclosure,” this is the least attractive option for homeowners and last resort for most lenders because under this situation you literally “give back” the property to the lender, which they are now required to dispose of (sell). By turning your home over to your lender you may forfeit any equity that you have built up in your home and you may lose any valid claims that you have against your lender if you choose to turn the home over. It is better to stay in the home and try to work out a way with your lender if possible to keep your home.

Your lender will help you determine which, if any, of these options you qualify for.