How to Stop or Avoid Foreclosure
Federal consumer agencies say the first step is to contact your mortgage servicer as soon as you expect trouble paying, and to consider a free or low-cost HUD-approved housing counselor. Servicers may offer "loss mitigation" options such as forbearance, a repayment plan, a loan modification, a short sale, or a deed-in-lieu of foreclosure. Federal rules generally bar a servicer from starting foreclosure until a loan is more than 120 days delinquent, and add protections when a complete loss mitigation application is submitted early enough.
What the law says
- If you can't pay or expect to miss a payment, the CFPB says to call your mortgage servicer right away; its number is on your monthly statement, coupon book, or the servicer's website. CFPB, If I can't pay my mortgage loan, what are my options?
- A servicer generally may not make the first notice or filing for any judicial or non-judicial foreclosure unless the loan is more than 120 days delinquent. Exceptions include a foreclosure based on violation of a due-on-sale clause or the servicer joining another lienholder's foreclosure action. 12 CFR 1024.41 (Regulation X), Loss mitigation procedures, as published by the CFPB
- Servicers generally should try to contact you within the first 36 calendar days after you become delinquent, and must send a written notice describing loss mitigation options no later than 45 calendar days after delinquency. CFPB, Does my mortgage servicer have to help me avoid foreclosure?
- Loss mitigation refers to the steps servicers take to work with a borrower to avoid foreclosure; options may include deed-in-lieu of foreclosure, forbearance, repayment plan, short sale, or a loan modification. CFPB, Mortgage key terms
- If a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, it must notify the borrower in writing within 5 days (excluding legal public holidays, Saturdays, and Sundays) after receiving it. 12 CFR 1024.41 (Regulation X), Loss mitigation procedures, as published by the CFPB
- If a complete loss mitigation application is received more than 37 days before a foreclosure sale, the servicer must evaluate it within 30 days. 12 CFR 1024.41 (Regulation X), Loss mitigation procedures, as published by the CFPB
- If a complete application is submitted after foreclosure has started but more than 37 days before a foreclosure sale, the servicer may not move for a foreclosure judgment or order of sale, or conduct a sale, unless the borrower is found ineligible (with any appeal resolved), rejects all options offered, or fails to perform under a loss mitigation agreement. 12 CFR 1024.41 (Regulation X), Loss mitigation procedures, as published by the CFPB
- The regulation does not require a servicer to provide any borrower with any specific loss mitigation option. 12 CFR 1024.41 (Regulation X), Loss mitigation procedures, as published by the CFPB
- HUD-approved housing counselors are free or low-cost and can review your situation, explain your servicer's options, and walk you through the paperwork; the HOPE Hotline is (888) 995-4673, available 24/7. CFPB, If I can't pay my mortgage loan, what are my options?
- Forbearance temporarily pauses or reduces mortgage payments; you still owe the full amount and repay the difference later. CFPB, What is forbearance?
- Freddie Mac describes a repayment plan as temporarily raising your regular payment to cover missed payments, for longer than one month but no more than 12 months, and a loan modification as a written agreement that restructures the mortgage, usually lowering the monthly payment. Freddie Mac, Options to stay in your home
- You should never have to pay for help avoiding foreclosure. Warning signs of scams include upfront fees, guarantees that you won't lose your home, requests to sign over your title, telling you to stop paying, and directing payments to someone other than your servicer. CFPB, If I can't pay my mortgage loan, what are my options?
FAQ
Who should I call first?
Your mortgage servicer. The CFPB says to call as soon as you know you can't make your monthly payment, and suggests free help from HUD-approved housing counselors if you can't get what you need from your servicer.
Can my servicer start foreclosure while I'm being evaluated for help?
The CFPB says the servicer can't start foreclosure while you're being evaluated, and that the earlier you complete the application, the more protections you get.
Is it ever too late to apply for loss mitigation?
Federal rules tie the strongest protections to timing. A complete application received more than 37 days before a scheduled foreclosure sale must be evaluated, and the sale generally cannot go forward while it is pending. Those two federal requirements are written for complete applications received more than 37 days before the sale, so acting early matters; state rules may also apply.
Can I appeal if my servicer denies a loan modification?
If the servicer receives a complete application 90 days or more before a foreclosure sale (or during the pre-foreclosure review period), it must let you appeal a denial of any trial or permanent loan modification program.
What options let me leave the home without a foreclosure?
The CFPB describes selling, a short sale, and a deed-in-lieu of foreclosure, and says these are typically cheaper, faster, and less damaging to credit than foreclosure.
Where can I find a housing counselor or legal help?
USAGov points to HUD's directory of HUD-approved housing counseling agencies, which offer free foreclosure prevention services, and to its legal aid directory for low-cost legal help.
Related
- Buying a Foreclosed Home: What to Know
- What Is a Deed in Lieu of Foreclosure?
- How Long Does a Foreclosure Stay on Your Credit Report?
- The Foreclosure Process Step by Step
- Foreclosure Surplus Funds: Who Gets the Money Left Over?
- What Is Foreclosure? (Including Pre-Foreclosure and REO)
- Foreclosure & Homeowner Law by state
General legal information, not legal advice. Laws change and local rules can differ; check the linked official source or talk to a lawyer about your situation.