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 it 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.
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 (make it current by paying off the delinquent amount in a lump sum). Or your mortgage contract might give you a set amount of time during which you can 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.
Unlike with a repayment plan, in a forbearance, the lender usually agrees in advance for you to miss or make reduced payments. With some kinds of forbearances, though, like under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, you don't have to be current on the loan at the time 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.
In most cases, refinancing is available only if you have equity in your home, and you have an acceptable credit score.
But if you have a Fannie Mae or Freddie Mac loan, you might qualify for a refinance even if you're underwater on your mortgage with Fannie's "High Loan-to-Value Refinance Option" or Freddie's "Enhanced Relief Refinance." To find out if either one of these entities owns your loan, use the Fannie Mae and Freddie Mac loan-lookup tools online. However, to qualify for one of these kinds of refinances, you can't have a 30-day delinquency in the most recent six months, or more than one 30-day delinquency in the past 12 months, and you must meet other eligibility criteria. To find out more about eligibility requirements, call your loan servicer or go to Fannie Mae's High LTV Refinance Option website or Freddie Mac's Enhanced Relief Refinance Mortgage website.
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.
To find out if you're eligible for a loss mitigation option, contact your servicer. 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.