First and foremost, if you can keep your mortgage current, do so. However, if you find that you are unable to make your mortgage payments, you may qualify for a loan workout option. Check with your lender to find out which of these options (or others) may be available.
- Reinstatement: Your lender may be willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a forbearance.
- Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon 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 in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.
- Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments, in addition to 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:
- Mortgage Modification: If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more 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.
- Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.
This information is brought to you through the collaborative efforts of HUD/FHA, the Department of Veterans Affairs, Department of Labor, Fannie Mae, Freddie Mac, and members of the mortgage industry.
Some workout options include expenses that you will be expected to pay, such as recording fees for a loan modification. Because every situation is different, you should be sure that you understand all the fees before signing any papers. To minimize the costs and particularly legal fees which can be very expensive, call your lender as soon as you realize you may be in trouble.