Know Your Options

Foreclosure can have significant legal and financial implications for borrowers, including the loss of their home, damage to their credit score, and potential tax consequences. It's important for borrowers facing foreclosure to understand their rights, options, and potential consequences, and to seek legal and financial advice from qualified professionals. There may be alternatives to foreclosure, such as loan modifications, short sales, or deed in lieu of foreclosure, that borrowers may explore to potentially avoid or mitigate the impact of foreclosure. 

Mortgage modifications are typically pursued by borrowers who are facing financial hardship, such as unemployment, reduced income, medical expenses, or other unforeseen circumstances that make it difficult to afford their mortgage payments. The goal of a mortgage modification is to make the mortgage more affordable and help the borrower avoid foreclosure. 

Bankruptcy is a legal status of an individual or entity that is unable to repay their debts to creditors. It is a legal process that provides relief to debtors who are overwhelmed with debt and cannot meet their financial obligations. Bankruptcy is typically initiated by the debtor or their creditors, and it involves a court-supervised process to resolve the debtor's financial situation. 

Depending on the timeframe of your foreclosure and what stage you are in, there is a chance you can still sell you home in time to prevent foreclosure.  You need to find a realtor and interview them.  Make an appointment and have them look at your property and give you an honest evaluation.  Most homes can sell with in 30 days, they have to be priced correctly to the current market conditions.  Negotiations and buyers getting loans can prolong the process, so know your timeframe.  Some banks will place foreclosure on pause with a real purchase offer.

Be proactive, burying your head in the sand works against you.  Contact your mortgage servicer and see what your options are.  A request for a mortgage modification can buy you time to weigh all your options.  Less than 20% of homeowners qualify for a mortgage modification.  Please read the mortgage modification section fully below.  There are many scams for mortgage modification and bankruptcy, so always talk with more than one professional. 

What is a mortgage loan modification?

A mortgage loan modification is a change in your loan terms. The modification is a type of loss mitigation. 

The modification can reduce your monthly payment to an amount you can afford. 

Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance.  

If you are offered a loan modification, be sure you know how it will change your monthly payments and the total amount that you will owe in the short-term and the long-term.

Tip: Carefully consider what kind of modification best addresses your needs. If you receive a loan modification and you still can’t make the payments, you may lose your home. If you’d like to learn more about your options, talk to a U.S. Department of Housing and Urban Development (HUD)-approved housing counseling agency. Call the CFPB at (855) 411-CFPB (2372) to be connected to a trained housing counselor. 

 If you can’t pay your mortgage or are worried about missing a mortgage payment, call your mortgage servicer right away. You should also contact a HUD-approved housing counseling agency to get free, expert assistance on avoiding foreclosure.

You can find the telephone number for your mortgage servicer on your monthly mortgage loan statement. If you don’t get a monthly mortgage statement, look in the mortgage loan coupon book your lender gave you. You can also look on your mortgage servicer’s website. If you don’t know the name of your mortgage servicer, contact a HUD-approved housing counseling agency for help.

When you call your mortgage servicer, be prepared to explain:

• Why you are unable to make your payment
• Whether the problem is temporary or permanent
• Details about your income, expenses and other assets like cash in the bank
• If you are a service member and have received permanent change of station (PCS) orders. (This is important to mention, because you may qualify for loss mitigation options because of your military move.)

Many mortgage servicers have programs to help people avoid foreclosure. Your mortgage servicer will look at your situation to consider the options that may be available to you. The servicer may ask you to fill out a mortgage assistance application. After the servicer reviews the completed application, it will let you know what loss mitigation options, if any, it will offer to you.

Through the Department of Housing and Urban Development  (HUD), you can find an agency to help you. The counselor can:

• Discuss your situation and whether you qualify for any      programs or additional help
• Help you understand the loss mitigation options your      servicer offers and which options might work best for you
• Guide you through the process of working with your      servicer and any other programs and paperwork you may need
• Help you at little or no cost with budgeting, credit      card debt, or other financial problems that may be making it hard to pay      your mortgage

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are HUD-approved. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

Through the Department of Housing and Urban Development  (HUD), you can find an agency to help you. The counselor can:

• Discuss your situation and whether you qualify for any      programs or additional help
• Help you understand the loss mitigation options your      servicer offers and which options might work best for you
• Guide you through the process of working with your      servicer and any other programs and paperwork you may need
• Help you at little or no cost with budgeting, credit      card debt, or other financial problems that may be making it hard to pay      your mortgage

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are HUD-approved. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

Through the Department of Housing and Urban Development  (HUD), you can find an agency to help you. The counselor can:

• Discuss your situation and whether you qualify for any      programs or additional help
• Help you understand the loss mitigation options your      servicer offers and which options might work best for you
• Guide you through the process of working with your      servicer and any other programs and paperwork you may need
• Help you at little or no cost with budgeting, credit      card debt, or other financial problems that may be making it hard to pay      your mortgage

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are HUD-approved. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

Through the Department of Housing and Urban Development  (HUD), you can find an agency to help you. The counselor can:

• Discuss your situation and whether you qualify for any      programs or additional help
• Help you understand the loss mitigation options your      servicer offers and which options might work best for you
• Guide you through the process of working with your      servicer and any other programs and paperwork you may need
• Help you at little or no cost with budgeting, credit      card debt, or other financial problems that may be making it hard to pay      your mortgage

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are HUD-approved. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

Through the Department of Housing and Urban Development  (HUD), you can find an agency to help you. The counselor can:

• Discuss your situation and whether you qualify for any      programs or additional help
• Help you understand the loss mitigation options your      servicer offers and which options might work best for you
• Guide you through the process of working with your      servicer and any other programs and paperwork you may need
• Help you at little or no cost with budgeting, credit      card debt, or other financial problems that may be making it hard to pay      your mortgage

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are HUD-approved. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The CFPB updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.

Mortgage modification scams are fraudulent schemes that prey on vulnerable homeowners who are struggling to make their mortgage payments or facing the possibility of foreclosure. These scams can take various forms and are typically perpetrated by individuals or companies that make false promises of helping homeowners obtain mortgage modifications but instead deceive them for financial gain. Here are some common types of mortgage modification scams:   

1. Upfront fee scams: In this type of scam, the scammer charges homeowners upfront fees for mortgage modification services but fails to provide any meaningful assistance. They may promise to negotiate with the lender on behalf of the homeowner but may not actually take any action or may provide false or misleading information.
2. Phishing scams: Scammers may contact homeowners through emails, phone calls, or other means, posing as representatives of  legitimate mortgage modification programs, lenders, or government agencies. They may request personal information, such as Social Security numbers, bank account numbers, or other sensitive information, with the intent of using it for identity theft or other fraudulent purposes.
3. False representation scams: Scammers may misrepresent themselves as affiliated with legitimate government programs, such as the Home Affordable Modification Program (HAMP), and promise guaranteed mortgage modifications or other favorable terms to homeowners. They may use official-looking logos, websites, or other materials to create the impression of legitimacy.
4. Bait-and-switch scams: In this type of scam, the scammer initially offers to help the homeowner with a mortgage modification but then changes the terms of the agreement, often to the homeowner's detriment. For example, they may pressure the homeowner to sign new documents that contain unfavorable terms or transfer the title of the property to the scammer's name.

Is it good to get a loan modification?

The primary advantage of a loan modification is to allow you to get back out of default and continue with your mortgage payments. You can get a lower monthly premium, a better interest rate, and more time to repay. If you are facing default, a loan modification may be your best option for staying afloat.

Do loan mods hurt credit?

A loan modification can result in an initial drop in your credit score, but at the same time, it's going to have a far less negative impact than a foreclosure, bankruptcy or a string of late payments.

Do you have to pay back a loan modification?

If your modification is temporary, you'll likely need to return to the original terms of your mortgage and repay the amount that was deferred before you can qualify for a new purchase or refinance loan.

Is it hard to qualify for a loan modification?

No matter how focused your attention to detail, your credit score almost certainly will take a hit with a home loan modification. Often, a homeowner won't get approved for a loan modification unless there is evidence of one or several missed payments. Those missed payments hurt your credit score.

What are the downsides of a loan modification?

The disadvantages of a loan modification include the possibility that you will end up paying more over time to repay the loan. The total you owe may even be more than your house is worth in some cases. In addition, you may pay extra fees to modify a loan or incur tax liability.

What disqualifies you from a loan modification?

You never completed the required loan modification package. You don't make enough money to support a loan modification. You don't have clear title to your property. You don't have a valid financial hardship reason.

What are the pros and cons of a loan modification?

It is essentially a brand new loan. Pros and cons: The benefit of a traditional loan modification is that the loan is brought current. The shortcomings are that it is essentially a new mortgage, and you will have another 30-years+ of mortgage payments.

How long after loan modification can I buy a house?

Generally, conventional mortgage loan guidelines require you have 24 months of payment history on the subject property (the property you want to get a new mortgage on) since the date of the modification, or 12 months of payment history if you trying to finance the non-subject property.

How long does a loan mod take?

You could receive your mortgage loan modification in as little as 30 days. Or you could be left waiting upwards of 90 days for everything to go through. It really comes down to the individual lender and their ability to quickly process mortgage modifications.

Can I refinance my house after a loan modification?

If your original lender modified your loan to make payments more affordable, you might need to wait three months to two years before refinancing it. Tip: If in doubt, contact your loan servicer and ask about restrictions on refinancing.