Alternatives to Foreclosure

If your mortgage is more than 30 days delinquent, your mortgage company is likely to begin foreclosure procedures within the next 60 to 90 days. There are, however, some steps that you can take now to help avoid foreclosure on your home.

If you currently have enough money to pay the entire past due amount, including any attorney fees or foreclosure costs (if foreclosure has begun), your mortgage company will accept your payment and reinstate your mortgage. If you don’t have the entire amount, but think you can make payments, to work out a repayment plan. Your repayment amount is likely to include your regular payment, in addition to an amount that will be applied toward your delinquency. Selling your home is another alternative.

Some other alternatives to foreclosure include:

Partial Claim

A partial claim is when the mortgage insurance company on your loan lends you the money to bring your loan current. If your loan has mortgage insurance, the insurance company stands to lose if you default. To help keep you in the house, the mortgage insurance company may help you get current on the loan.

Many mortgage insurance companies have trained personnel available to help people who are having trouble with their mortgage payments.

Straight Modification

A straight modification is an agreement that actually changes the term of your loan. The modification could lower the interest rate and payments to an amount you can afford.

The lender could also use the modification to add the missed payments to your current balance. This could increase your monthly loan payments so you would need to prove you can afford to pay the higher payment without defaulting again.


Forbearance is a written agreement where you send a lump-sum amount to the lender. Each month thereafter you pay your regular payment plus half of your mortgage payment. For example, if your regular mortgage payment is $600 per month, your initial lump-sum payment might be $500 to $800. Then each month thereafter until you are current, your payment would be $900 ($600 plus $300). Most forbearance plans are for three to six months.

Permanent Hardship

A permanent hardship occurs when you can no longer afford to make the mortgage payments. Your mortgage company may agree to delay the foreclosure on your house for up to 120 days and give you time to sell the house. If, when you sell the house, you get less than what you owe on the house, the lender may forgive (not make you pay) the difference.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is when you voluntarily deed the property back to the investor (or government) in exchange for a release from all your obligations under the mortgage. Although you lose your house, it is usually preferable to foreclosure because of the cost and emotional trauma of a foreclosure. And it is less damaging to your credit rating.

In some cases, the Federal Housing Administration (FHA) will even pay the borrower a stipend to execute a deed in lieu of foreclosure.

Short Sale

A short sale, also known as a short payoff, works when property values have declined since the borrower took out the mortgage. It allows you to sell for less than the full amount you owe.

On VA loans, the Department of Veterans Affairs has the authority to buy loans in default from investors and take over the servicing of the mortgage loan. Executing a short sale is an option on the government’s part and not every borrower qualifies.

Quitclaim Deed

A quitclaim deed transfers whatever interest you have in a particular piece of property. By accepting such a deed, the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

If you're having trouble making your home loan payments, talk to a HUD-certified housing counselor ASAP to walk through your options and get help connecting with your lender.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Candid GuideStar Gold Transparency level 2022 Candid
    MMI has achieved a Gold Seal of Transparency by Candid (formerly GuideStar), a leading source for insights on thousands of nonprofit organizations. For decades, Candid has provided data that powers hundreds of websites, programs, and applications related to philanthropic giving in order to help grantors make informed decisions.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.