If you default on your mortgage loan payments, the bank or financial institution from which you obtained the loan can take possession of your property in a process called foreclosure. However, foreclosing on properties is not cost effective for lenders. Therefore, they often try to avoid it if possible.
If you get in touch with your lender right away to explain your financial situation, it may be possible to negotiate an alternate arrangement that would avoid foreclosure. The Consumer Financial Protection Bureau explains some of the options that may be available to you.
1. Forbearance
A forbearance allows you to either temporarily stop making mortgage payments or pay a lower amount. Your lender will let you know how long your forbearance will last. When it is over, you will have to make arrangements with your lender to make up for the payments you missed.
2. Modification
A mortgage modification is a change to the original loan agreement. Reducing the amount that you have to pay back or giving you more time to pay back the loan are examples of possible modifications.
3. Repayment plan
A repayment plan is an arrangement that allows you to pay back the payments you miss. Your lender may offer you a repayment plan by itself or as part of a forbearance.
A bank or financial institution may decide that it is in its own interest to help you avoid foreclosure. However, it is under no obligation to do so. If you cannot negotiate an arrangement with your lender, you may have to turn to outside sources for help.