Many loan servicers have expanded the options available to borrowers who are finding themselves in financial stress. Call your servicer – even if you’ve been turned down before. But be patient because servicers are getting lots of calls, and be persistent if you don’t reach your servicer on the first try. Learn about the President's plan to help homeowners at www.makinghomeaffordable.gov.
Here are some possibilities to discuss with your loan servicer:
- Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.
- Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you’ve missed a few payments.
- Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). But it isn’t going to help you if you’re in a home you can’t afford.
- Loan modification: You and your loan servicer agree to change one or more of the terms of the mortgage contract permanently to make your payments more manageable. Changes might be reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A change also may involve reducing the amount of money you owe on your primary residence by forgiving, or cancelling, a portion of the mortgage debt. A loan modification may be necessary if you are facing a long-term reduction in your income or an increase on an adjustable rate mortgage (ARM).
- Selling your home: Depending on the real estate market in your area, selling your home may provide the funds you need to pay off your current mortgage debt in full.
- Bankruptcy: Personal bankruptcy is thought of as the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to get credit, buy another home, get life insurance, or get a job. Still, it is a legal procedure that can offer a fresh start for someone who can’t satisfy their debts.
If you have a mortgage through the Federal Housing Administration (FHA) or Veterans Administration (VA), you may have other foreclosure alternatives. Contact the FHA (www.fha.gov) or VA (www.homeloans.va.gov) to talk about them.