Loan Modifications and Workouts

When a lender is looking at a solution for a loan in default, there are solutions ranging from a simple repayment plan all the way down to completing a foreclosure action. Foreclosure is costly for lenders and there are benefits for successfully keeping a homeowner in the home, so most lenders do actively try to work with their borrowers in default. The options listed below are in the order most lenders will prefer to workout a defaulted loan with the repayment plan being the preferred, most used
option. If you have questions regarding these plans and whether they may work for
you, questions can be asked and answered in our Foreclosure Discussion Forum.

Repayment Plan

A formal or informal plan to re-pay the lender all of the past due amounts and fees over a period of time.  This type of workout will usually require a downpayment, then monthly payments along with your regular monthly payment.

Forbearance

The lender has the capability to reduce or suspend payments for a period of time allowing you to recover from a financial setback.

Loan Modification

Designed to resolve default for longer term financial problems, this could include reduction of the loan interest rate, or reducing payments.

Loan Assumption

If the loan cannot be brought current and kept current, the payments on some loans can be assumed by a new borrower usually requiring new borrower qualification.

Pre-Foreclosure Sale

Sale of the property before the foreclosure can be completed.   If proceeds from the sale aren’t enough to fully repay the loan, this is often referred to as a “Short Sale”.

Deed In Lieu of Foreclosure

This is the least preferred of all the options, and often not acceptable to the lender due to title issues or the presence of other loans against the property.
The documents commonly necessary for a successful workout can be found at:
Workout Documentation