Behind on Your Mortgage? How to Avoid Foreclosure

Lesson 9.1

Early Warning Signs and Your First Three Calls

Nobody plans to miss a mortgage payment. It usually starts with a job loss, a cut in hours, a medical bill, a divorce, a death in the family, or a payment that went up because taxes or insurance went up. The mistake that costs people their homes is not the missed payment. It is waiting, hiding from the mail, and not calling anyone.

Warning Signs That You Are Heading for Trouble

• You are using credit cards or a payday loan to make the mortgage payment
• You are paying the mortgage late, even by a few days, more than once in a few months
• Your escrow payment is about to jump after a tax or insurance increase and you have not budgeted for it
• You have less than one month of expenses in savings and your income just dropped
• You have an adjustable-rate loan that is about to reset
• You are choosing between the mortgage and food, medicine, or utilities

Any one of these is a reason to act now, before you miss a payment. Servicers have more options for a borrower who is current or one payment behind than for one who is five payments behind.

Your First Three Calls

1. A HUD-approved housing counselor. Counseling is free or low cost. A counselor will go through your budget, explain your options, and help you talk to your servicer. Call 888-995-HOPE (4673), or search HUD's approved agency list at hud.gov.
2. Your mortgage servicer. This is the company you send your payment to. It may not be the company that made your loan. Ask for the loss mitigation department, say you are having a hardship, and ask what options you qualify for. Write down the date, the name of the person, and what they told you.
3. A housing attorney or legal aid office, if you have received a foreclosure notice. A counselor can explain your options. An attorney can tell you what your legal rights are in your state.

What to Gather Before You Call

• Your last two mortgage statements and your loan number
• Recent pay stubs, or proof of unemployment, disability, or other income
• Your last two bank statements
• A list of monthly expenses and debts
• A short written explanation of what caused the hardship and whether it is temporary or permanent
• Every letter you have received from the servicer

Lesson 9.2

Your Options: Loss Mitigation Explained

"Loss mitigation" is the industry word for the ways a servicer can help a borrower who has fallen behind. The goal is to keep you in the home when you can afford it and to end things as cleanly as possible when you cannot. The names of the programs change by loan type, but the tools fall into a few groups.

Options That Help You Keep the Home

• Forbearance: The servicer agrees to reduce or pause your payments for a set time, often several months. It is not forgiveness. The missed amounts are still owed, and you need a plan for how they get repaid. Forbearance is for a hardship you expect to end.
• Repayment plan: You make your regular payment plus an extra amount each month until the past-due amount is caught up. It works if your income has recovered and you can afford a higher payment for a while.
• Reinstatement: You pay the full past-due amount in one lump sum, including fees. It is the cleanest fix if you have the money, for example from a tax refund or a relative.
• Payment deferral or partial claim: The past-due amount is moved into a separate balance, usually with no interest, that is repaid when you sell, refinance, or pay off the loan. Your regular monthly payment stays the same. Which loan types offer this is covered in Lesson 9.3.
• Loan modification: The servicer permanently changes the terms of the loan. It might lower the rate, extend the term (sometimes to 40 years), or move part of the balance to the end of the loan. Modifications are for a hardship that is not going away.

Options That End Homeownership on Better Terms

• Short sale: You sell the home for less than you owe, with the servicer's approval. A short sale is usually less damaging to your credit than a foreclosure.
• Deed in lieu of foreclosure: You voluntarily hand the property back to the lender. It is generally quicker and quieter than a foreclosure.

Ask each option the same questions: What will my payment be? What do I owe at the end? What does it do to my credit? How long does it last? Do I owe taxes on any forgiven debt? Get the answers in writing.

Lesson 9.3

What Each Loan Type Offers

Government-backed loans have standard menus that servicers must follow. Conventional loans follow rules set by whoever owns the loan, usually Fannie Mae or Freddie Mac. These programs change, so treat what follows as a map and confirm the current details with your servicer or counselor.

FHA Loans

HUD requires FHA servicers to evaluate borrowers for a set order of options, which can include a repayment plan, a forbearance, a partial claim, a loan modification, or a combination. A partial claim moves the past-due amount into a separate zero-interest second lien that is repaid when the home is sold or the first mortgage is paid off. In general, you can receive only one permanent home-retention option every 24 months unless a presidentially declared disaster applies. HUD has been updating its trial payment plan rules in 2026, so ask your servicer what applies to you today.

VA Loans

The VA works with servicers to help veterans stay in their homes, and a VA servicer is expected to look at every option before foreclosing. The older VASP program stopped taking applications on May 1, 2025. In its place, the VA Partial Claim Program began in June 2026. It uses a three-month trial payment plan followed by a no-interest, no-payment second lien that is repaid when you sell, refinance, or pay off the loan. Servicers have until late November 2026 to fully implement it, so some may still be catching up. If you are a veteran, also call the VA Home Loan Guaranty hotline at 877-827-3702 and ask for a loan technician.

USDA Loans

USDA guaranteed loans have their own loss mitigation menu that can include forbearance, repayment plans, and modifications. Ask your servicer for the USDA options by name and ask which ones you qualify for.

Conventional Loans (Fannie Mae and Freddie Mac)

Servicers of most conventional loans can offer forbearance, repayment plans, payment deferrals, and modifications. These programs are designed so that past-due amounts can be moved to the end of the loan without interest, or the loan terms can be reset so the payment is affordable. A few conventional loans are held by banks themselves, in which case the bank sets its own options. You can look up whether Fannie Mae or Freddie Mac owns your loan on their websites.

Lesson 9.4

The Foreclosure Timeline and Your Legal Protections

Federal Rules for Mortgage Servicers

The CFPB's mortgage servicing rule (Regulation X) gives you protections that apply to most mortgages:

• The 120-day rule. A servicer generally cannot start a foreclosure until you are more than 120 days delinquent. That gives you about four months to apply for help.
• Dual tracking limits. If you submit a complete loss mitigation application more than 37 days before a foreclosure sale, the servicer generally has to evaluate it, and cannot move forward with the sale while it is being reviewed.
• Timelines for the servicer. The servicer must acknowledge your application within five business days and tell you whether it is complete. A complete application must generally be evaluated within 30 days.
• A right to appeal. If you applied at least 90 days before a sale and a loan modification is denied, you generally have the right to appeal.

The words "complete application" matter. If the servicer says your application is missing a document, send it right away and keep proof that you sent it.

What Happens in Texas

Texas is a non-judicial foreclosure state, which means the lender can foreclose without going to court if the loan documents allow it. The usual steps are:

1. The servicer sends a notice of default by certified mail, giving you at least 20 days to pay what is past due and bring the loan current.
2. If you do not cure the default, the servicer sends a notice of sale at least 21 days before the sale date.
3. The sale takes place at the county courthouse (or another place the county designates), on the first Tuesday of the month, during a window between 10 a.m. and 4 p.m.

So a Texas homeowner can see a sale date roughly 41 days after the first default notice. Federal rules like the 120-day rule still apply, but Texas moves quickly once the process starts. If you live in Texas and receive a notice of default, call a counselor that day. Other states have different rules, and some require a court process that takes much longer. Ask a counselor or an attorney how your state works.

If the Servicer Is Not Following the Rules

Write down what happened, keep copies of everything, and file a complaint with the CFPB at consumerfinance.gov/complaint. The servicer must respond. You can also contact your state attorney general or a legal aid office.

Lesson 9.5

Foreclosure Rescue Scams

Scammers read the public foreclosure notices and then go looking for the people named on them. They send official-looking letters, call, and knock on doors. They sound helpful. They are looking for your money or your deed.

Red Flags

• They ask for money up front. It is generally illegal for a company to charge you a fee before it has actually gotten you a deal with your servicer.
• They guarantee they can stop the foreclosure. Nobody can guarantee that.
• They tell you to stop talking to your servicer, your lawyer, or your housing counselor. That is how they keep you isolated.
• They ask you to sign over the deed, often with a promise that you can stay as a renter and buy the home back later. You then lose ownership and can be evicted.
• They tell you to make your mortgage payments to them, not to your servicer.
• They ask for payment by wire, cashier's check, or a payment app, because that money is hard to get back.
• They use a name that sounds like a government agency or a nonprofit. Look-alike names and websites are common.
• They pressure you to sign right now, or ask you to sign papers you have not read.

What to Do Instead

• Work only with a HUD-approved counselor. Counseling through the HOPE Hotline is free.
• Never sign a document you do not understand, and never sign anything that transfers ownership without talking to an attorney first.
• Make mortgage payments only to the servicer named on your statement.
• Report scams to the FTC at reportfraud.ftc.gov and to the CFPB at consumerfinance.gov/complaint.