Loan Modification and Foreclosure Alternatives

The options a homeowner behind on a mortgage can ask the servicer for - forbearance, repayment plans, loan modification, short sale and deed in lieu - and the federal rules on how servicers must handle the request.

Looking for a lawyer rather than a definition? Skip to the state-by-state list of Foreclosure & Alternatives law firms.

What it means

A homeowner who falls behind on a mortgage usually has options short of foreclosure, collectively called loss mitigation. Ways to keep the home include forbearance (payments reduced or paused for a period, to be made up later), a repayment plan that adds part of the arrears to each payment, a loan modification that permanently changes the loan's terms - for example adding the arrears to the balance, lowering the rate or extending the term - and, for some government-backed loans, a partial claim that moves the arrears into a separate interest-free lien. Ways to leave the home without a foreclosure include a short sale, where the lender agrees to accept less than the balance from a sale, and a deed in lieu, where the owner transfers the home to the lender.

Federal rules govern how mortgage servicers handle these requests. A servicer must try to contact a delinquent borrower early and assign personnel to help, and must acknowledge a loss mitigation application, tell the borrower what is missing, and evaluate a complete application for every option it offers. If a complete application arrives early enough, the servicer generally may not start foreclosure, or move for a judgment or sale, while the application is pending, a practice known as dual tracking. A borrower denied a modification must be told the reasons and, in many cases, may appeal. The specific options depend on who owns or insures the loan: Fannie Mae, Freddie Mac, FHA, VA and USDA each publish their own programs.

Timing matters more than anything else: the protections depend on how complete the application is and how far the foreclosure has gone, so a borrower should apply as soon as trouble starts and keep copies of everything sent and received. A short sale or deed in lieu may leave a deficiency unless the lender waives it in writing, and forgiven mortgage debt may have tax consequences. Beware of companies that charge upfront fees to obtain a modification; federal rules generally forbid collecting fees before the homeowner accepts a modification offer.

Where this comes from

When people hire a lawyer for this

HUD-approved housing counselors help homeowners apply for loss mitigation at no cost and are a good first call. Talk to a foreclosure defense or consumer lawyer if a foreclosure date has been set, if the servicer keeps losing documents or denies you without a clear reason, if you are being sued in a judicial foreclosure, or before agreeing to a short sale or deed in lieu that does not waive a deficiency. Legal aid programs in many areas have foreclosure prevention units.

Worried about the cost? A lawyer can be hired for one part of a case only (limited-scope representation), may be paid from what a claim recovers (contingency fee), or may be free through a pro bono program or legal aid; a court can also waive its own filing fees.

Find Foreclosure & Alternatives law firms in your state

Choose your state to see Foreclosure & Alternatives law firms in the city where we list the most; your city may be under “other cities”, A to Z. A state marked “Real Estate” has no Foreclosure & Alternatives listing yet and opens the broader page.

• Alabama (Birmingham)
  +1 other city

  • Montgomery
• Alaska (Anchorage)
• Arizona (Chandler)
  +6 other cities

  • Gilbert
  • Glendale
  • Mesa
  • Phoenix
  • Scottsdale
  • Tucson
• Arkansas (Little Rock)
• California (Fontana)
  +19 other cities

  • Anaheim
  • Bakersfield
  • Chula Vista
  • Fremont
  • Long Beach
  • Los Angeles
  • Modesto
  • Oxnard
  • Riverside
  • Sacramento
  • San Bernardino
  • Stockton
  • and 7 more with fewer listed firms
• Colorado (Aurora)
  +2 other cities

  • Colorado Springs
  • Denver
• Connecticut (Bridgeport)
• Delaware (Wilmington)
• District of Columbia (Washington)
• Florida (Hialeah)
  +5 other cities

  • Jacksonville
  • Miami
  • Orlando
  • St Petersburg
  • Tampa
• Georgia (Atlanta)
• Hawaii (Honolulu)
• Idaho (Boise, Real Estate)
• Illinois (Chicago)
• Indiana (Fort Wayne)
  +1 other city

  • Indianapolis
• Iowa (Des Moines)
• Kansas (Wichita)
• Kentucky (Lexington)
  +1 other city

  • Louisville
• Louisiana (Baton Rouge)
  +2 other cities

  • New Orleans
  • Shreveport
• Maine (Portland)
• Maryland (Baltimore)
• Massachusetts (Boston)
• Michigan (Detroit)
• Minnesota (Minneapolis)
  +1 other city

  • Saint Paul
• Mississippi (Jackson)
• Missouri (Kansas City)
  +1 other city

  • St. Louis
• Montana (Billings)
• Nebraska (Lincoln)
  +1 other city

  • Omaha
• Nevada (Henderson)
  +3 other cities

  • Las Vegas
  • North Las Vegas
  • Reno
• New Hampshire (Manchester)
• New Jersey (Jersey City)
  +1 other city

  • Newark
• New Mexico (Albuquerque)
• New York (New York City)
  +2 other cities

  • Buffalo
  • Rochester
• North Carolina (Charlotte)
  +5 other cities

  • Durham
  • Fayetteville
  • Greensboro
  • Raleigh
  • Winston-Salem
• North Dakota (Fargo, Real Estate)
• Ohio (Cincinnati)
  +3 other cities

  • Cleveland
  • Columbus
  • Toledo
• Oklahoma (Oklahoma City)
  +1 other city

  • Tulsa
• Oregon (Portland)
• Pennsylvania (Philadelphia)
  +1 other city

  • Pittsburgh
• Rhode Island (Providence)
• South Carolina (Columbia)
• South Dakota (Sioux Falls)
• Tennessee (Nashville)
  +1 other city

  • Memphis
• Texas (Arlington)
  +11 other cities

  • Austin
  • Corpus Christi
  • Dallas
  • El Paso
  • Fort Worth
  • Garland
  • Houston
  • Irving
  • Laredo
  • Plano
  • San Antonio
• Utah (Salt Lake City)
• Vermont (Burlington)
• Virginia (Chesapeake)
  +3 other cities

  • Norfolk
  • Richmond
  • Virginia Beach
• Washington (Seattle)
  +2 other cities

  • Spokane
  • Tacoma
• West Virginia (Charleston)
• Wisconsin (Madison)
  +1 other city

  • Milwaukee
• Wyoming (Cheyenne, Real Estate)

Related terms

Entries on the same subject:

• Foreclosure (Judicial and Non-Judicial)The process by which a mortgage lender takes and sells a home after default - the court-supervised route some states require and the trustee's sale others permit, the federal servicing rules that must be followed first, the loss-mitigation alternatives, and what the borrower can still owe or reclaim after the sale.

Other entries in the same area of law, each written from the same primary sources.

• Adverse PossessionThe doctrine by which a person who occupies land they do not own, openly and continuously for the period the state sets, becomes its owner - the elements, the "color of title" and tax-payment variations, and why it decides fence and driveway disputes far more often than it transfers whole parcels.
• Boundary Line DisputeHow property lines are established, why fences and old surveys so often disagree with the deed, the doctrines that can move a boundary, and how disputes are resolved.
• Breaking a LeaseWhat a tenant owes when leaving before a fixed-term lease ends, the landlord's duty in most states to re-rent, and the situations in which the law lets a tenant end a lease early.
• Construction Defect ClaimsAn owner's or association's claim against a builder, developer, contractor or design professional for defects in how a home or building was designed or built.
• Deed Types: Warranty, Special Warranty and QuitclaimWhat the different forms of deed promise about the title they convey - the general warranty deed's guarantee against every defect, the special warranty deed's narrower one, and the quitclaim deed's none - and what each is used for.
• EasementA legal right to use someone else's land for a defined purpose, without owning it.
• Eminent Domain (Condemnation and Just Compensation)The government's power to take private property for public use, which the Constitution allows only with just compensation, and the owner's rights when it does.
• Eviction (Unlawful Detainer)The court process a landlord must use to make a tenant leave - and in most states, the only lawful way to do it.
• HOA Covenants and Assessment LiensThe recorded restrictions that bind every owner in a planned community or condominium, the association that enforces them, and the assessment lien that lets it foreclose on a home for unpaid dues - what the documents control, how they are amended and enforced, and the limits the states have placed on association power.
• Homeowners Insurance ClaimHow a property loss claim actually works - what the policy covers, the duties it imposes on you, and where claims most often fail.
• Implied Warranty of HabitabilityA landlord's obligation to keep a rented home fit to live in - one the lease usually cannot sign away.
• Land Use and ZoningThe local rules that decide what can be built where, and the variances, special permits, rezonings and appeals an owner uses when the rules stand in the way.
• Mechanic's Lien (Construction Lien)The statutory lien a contractor, subcontractor, supplier or laborer may record against a property for unpaid work or materials - the preliminary notices and filing deadlines that make or break it, why an owner who paid the general contractor can still face a subcontractor's lien, and how the lien is enforced or released.
• Private Nuisance (Neighbor Disputes)When a neighbor's noise, smoke, odors, light, water or trees become a legal wrong, how courts weigh the harm, and what remedies are available.
• Purchase Contract ContingenciesThe conditions in a home-purchase agreement that let a buyer walk away with the deposit - inspection, financing, appraisal, sale of the buyer's current home, title - how each is exercised and waived, and what happens to the earnest money when the deal fails.
• Quiet Title ActionThe lawsuit that asks a court to declare who owns a property and to remove a competing claim from the record - used to clear an old mortgage never released, a break in the chain of title, a tax-sale or adverse-possession claim, or a deed that should never have been recorded.
• Security DepositMoney a tenant leaves with a landlord against damage or unpaid rent - held under state rules that usually require an itemized accounting within a fixed period after move-out.
• Seller Disclosure DutiesWhat a seller of a home must tell a buyer about the property - known material defects, water intrusion, structural and system problems, and under federal law lead-based paint - the state disclosure forms, the "as is" sale, and what a buyer can do when a problem was concealed.
• Title Search and Title InsuranceThe examination of public records that establishes who owns a property and what claims stand against it, and the insurance policy that pays if that examination missed something - who is protected by the lender's policy, who by the owner's, and what neither covers.
• Transfer-on-Death DeedA recorded deed that leaves a house to someone at death while changing nothing during life - available in many states, and not all.

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