Foreclosure: Here are Options When You Cannot Make Your Mortgage Payments

The economy has improved during the past decade. The number of foreclosures has decreased since the last financial crisis. It is noteworthy that foreclosure filings are down 18% which is an improvement since 2015. Howbeit, for the first half of 2019, there have been over 300,000 foreclosure filings. A foreclosure can have a disastrous effect upon your credit report. It will devastate your credit score and make it more difficult to rent or buy a property.

However, foreclosure is not the end of the world for your credit situation. After three years, you can purchase property once your financial lifestyle has improved. But, you will want to avoid the ramifications of foreclosure. There are several options to consider when you are having financial difficulties. These options will help you avoid foreclosure when you cannot make your mortgage payments.

Get Advice from a Financial Counselor

It is best to contact your mortgage lender and servicer immediately once you have missed your first payment. Together, you can work on an acceptable payment agreement to prevent any additional arrears on upcoming payments. Your mortgage provider may have several hardship programs to assist you during financial difficulties.

If you do get a foreclosure notice, don't panic. Contact the Department of Housing and Urban Development. An HUD counselor can provide foreclosure avoidance advice. The counselor will analyze your financial situation and offer advice about budgeting and credit card debt.

In addition, contact your local Legal Aid society for your state for foreclosure assistance. Legal Aid receives federal assistance to help citizens fight foreclosures. A representative from the agency will determine your eligibility by looking at income statements, bank accounts, and other financial documents. Upon eligibility, a pro bono attorney will represent you in fighting the foreclosure proceedings.

Refinance Your Mortgage

Refinancing your home is a great option that will help you maintain a strong credit score. The overall household income must be strong and stable. You must have enough equity in your home to do a cash-out refinance. The funds from a home equity loan can be used to consolidate debt and to catch up on any outstanding mortgage payments. The current Federal Reserve interest rates are low. With a home equity loan, you may just get lower mortgage payments with a better interest rate.


A forbearance agreement is a temporary solution for a short-term financial crisis. This is especially true during the loss of job and income. The lender may agree to reduce temporarily or suspend monthly mortgage payments for a specified timeframe. During the forbearance period, the borrower will still be responsible for principal payments, accrued interest, homeowner's insurance, and property taxes.

Repayment Plan

Several mortgage lenders also offer repayment plans. If you are currently behind on your mortgage payments, your lender can arrange a repayment plan that will include the amount in arrears. Upon approval, the mortgage payment in arrears can be spread out over a three to a six-month time period. This will give you time to elevate your financial status.

Loan Modification

If your financial situation is dire, you will need a loan modification. You must have income in order to use this option. Preferably, an attorney or a special housing counselor will contact your lender to authorize the loan modification. This will permanently change the entire structure of your home mortgage plan. The loan modification will give you better payment terms and interest rates that will fit within your budget. The entire process can be quite lengthy. During the loan modification process, you will enter a trial period to make sure you can meet the monthly payment obligations. Afterward, loan modification becomes permanent.

Sell Your Home

Foreclosure proceedings can normally start anywhere from three to six months after several missed payments. This will give you time to sell your home. A regular sale is preferred for a home that is market-ready, and you do not owe more on the house than it is worth.

If you are upside down on your home loan, consider a short sale. The bank will allow the borrower to sell the home for less money than what is owed on the property. This option is preferable to a full foreclosure proceeding. The mortgage lender will recoup majority of the mortgage expense while the borrower avoids damaged credit.

Deed in Lieu of Foreclosure Process

Sometimes, leaving your home is unavoidable. This is especially true during financial hardship and loss of substantial income. In this case, if you cannot continue in your home, you can do a deed in lieu of foreclosure. Essentially, you give the deed back to your property lender, and you are therefore released from the terms of your mortgage. This is a private affair; it will spare you the public proceedings of a lengthy foreclosure process.

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