With a repayment plan, you arrange to make up your missed payments over time and stay current on your ongoing payments. This approach is usually the most feasible and easiest to work out with your servicer.
For a repayment plan to work, your income will have to be able to cover both current and makeup payments. Repayment plans typically last three, six, or nine months. Servicers usually don't offer longer plans because most borrowers find it difficult to make larger-than-normal payments for an extended amount of time.
For example, say you're four months behind on your payments of $1,500 a month, for a total of $6,000. Paying $2,500 each month (an extra $1,000 per month) over the next six months would bring you current.
Sometimes, the servicer can approve a repayment plan immediately without asking the lender for approval. The longer it will take you to catch up, the likelier your servicer will have to get permission from the lender.
Many states give you, by law, the right to reinstate your loan. Or your mortgage contract might give you a set amount of time to reinstate and stop a foreclosure. Also, the lender might agree to allow a reinstatement.
In all states, you can redeem the home (pay off the entire loan) before a foreclosure sale. Redeeming will prevent the sale from happening.
Some states also give the borrower some time after the sale to redeem the property by paying the mortgage loan off in full, plus interest and costs, or reimbursing whoever bought the home at the foreclosure sale.
Under a forbearance agreement, the servicer or lender agrees to reduce or suspend your mortgage payments for a specific amount of time. In exchange, you promise to start making your full payment at the end of the forbearance period and repay the skipped amounts in a lump sum, in a repayment plan, or by completing a modification in which the lender adds the overdue amounts to the loan balance. Or you might be able to arrange payment deferral, where you pay the skipped amounts at the end of the loan.
Forbearance is most common when someone is laid off or called to active military duty for a relatively short amount of time and can't make payments now but will likely be able to catch up soon. Forbearance for three to six months is typical, though a longer period might be possible, depending on the lender's guidelines and your situation.
With a forbearance, the lender sometimes agrees in advance for you to miss or make reduced payments. However, with some kinds of forbearances, you don't have to be current on the loan when you get the forbearance.
Unlike repayment plans and forbearances, mortgage modifications are designed to lower your monthly payments over the long term and, often, bring you current on the loan. If you can't afford your monthly payment now or won't be able to soon, a loan modification is most likely the best approach to remaining in your house.
Some reasons why you might need a modification include:
Here's how your servicer might modify your mortgage to reduce the monthly payments.
You might be able to refinance your loan even if your mortgage is delinquent, but the odds aren't good. Contact your current lender to find out if they have any available programs. Your current lender might be more willing to refinance a delinquent mortgage than other lenders.
In a short sale, the lender agrees to let the homeowner sell the home to a new owner for less than is owed on the mortgage loan. In a deed in lieu of foreclosure transaction, a homeowner voluntarily hands over the home's title to the bank to satisfy the mortgage loan.
Contact your servicer to find out if you're eligible for a loss mitigation option. If you need more information about different ways to avoid foreclosure or how to fight a foreclosure, consider talking to a foreclosure attorney or a HUD-approved housing counselor.