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Basics: Avoiding Home Foreclosure

Last Modified: 12/17/2019

Foreclosure is a situation where the homeowner is unable to make their mortgage loan payments as required. If you miss payments, your lender may be able to legally take back the property through a legal process known as foreclosure.  There are programs available to help you avoid foreclosure and work with your lender. 



Don’t ignore letters from your lender.  They may actually be helpful to you. The first notices you receive will offer good information about how you can prevent foreclosure.

Contact your lender immediately, before you fall behind. They may have options available to prevent home loss. Be prepared to explain: 

  • Why you are unable to make your payment
  • If the problem or hardship is temporary or permanent 
  • Details about your income and household expenses and other assets like money you may have in your checking or savings accounts. 

Contact a HUD approved Housing Counseling agency. CLSMF is a HUD approved Housing Counseling and can help you review your options and assist in the process. 




Forbearance – If the reason you fell behind is temporary, your lender may offer a temporary reduction or suspend your payments for a short period of time.  You will need to bring your loan current (meaning, all payments must be made) or enter a repayment plan with your lender once your hardship is over and you are able to start making payments again. 

Modification – a modification is a permanent change to your loan.  Past due payments could be placed back into your loan and in order to make the payment more affordable, your lender could lower the interest rate, add years to your loan term, or both.  

Partial Claim – if you have an FHA (Federal Housing Administration) loan, the lender may offer you a second loan to bring your mortgage current. The loan is interest free and does not need to be repaid until your first mortgage has been paid off.  If you do not have an FHA loan, you can ask your lender if they offer an Advance Claim– this is the same as the Partial Claim, but available on non-FHA loans. 




With your lender’s permission you can offer to sell your home at the fair market value, even if that value is less than what you owe.  

This page from government lender Fannie Mae will show you details about a Mortgage Release.

Deed-in-lieu of foreclosure

As a last resort, you may be able to voluntarily give back your property to your lender. This is sometimes called a Mortgage Release. 

This page from government lender Fannie Mae will show you details about a Mortgage Release. 



The problem does not get better by ignoring your lender.  Answer the calls, open the mail. They can help if they understand what the hardship is.




If you are applying for any of the options to either keep your home or not, your lender will send you an application to complete and a list of documents to return with your completed application. If you do not submit a complete packet, you might have to start the entire process over again, so follow their instructions carefully.


If your lender asks for the last 2 months of bank statements, send them ALL of the pages, not even if they say “this page left blank intentionally”.  If your bank statement lists page 1 of 8 you will need to send them ALL 8 pages. 



Things happen in life and we all could use some help from time to time.  If your lender doesn’t know what the problem is, it will be hard for them to help.  Call before it is too late.  




Maybe your income is less or maybe you had some unexpected expenses, such as medical bills or legal fees due to divorce.  Either way, this is a good time to figure out your income and track your expenses so that you can determine what your options might be. 

For more information, visit the CLSMF webpage about starting a budget for your household. 



A CLSMF Housing Counselor can assist you in working with your lender, developing an emergency budget, determining what options might be available and help complete the paperwork required by your lender in order for a solution to be offered. 

Call today! 800-405-1417

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