If possible, try to go right to the mortgage company’s “Loss Mitigation” department (it may be called the “Foreclosure Prevention” department) if the mortgage terms become unmanageable. Ask them to send a “work-out” packet to update your financial information, including income, expenses, and other debts. If you qualify, several options may be made available.

Forbearance Agreement - Allows you to make a payment and a partial payment for several months until you catch up.

Mortgage Modification - Can change the terms of the loan including the length of the loan, reducing the interest rate and changing from an adjustable to a fixed interest rate.

Partial Claim - For FHA loans, HUD offers a free interest loan to catch up the arrearage.

PMI/Private Mortgage Insurance – If the homeowner has Private Mortgage Insurance they need to contact their mortgage company to find out who is their Private Mortgage Insurer. The insurance company might offer funds to assist with a work out plan rather than loose their investment.

Pre-Foreclosure Sale - Allows you to sell the property for less than the mortgage balance.

Deed-in-lieu of foreclosure - A last resort is to give the house back to the lender. This is an option only if there are no other liens or encumbrances.