How to Keep Your Home and Avoid Foreclosure

If you fail to make your mortgage payments each month, your bank or mortgage lender may take action to repossess your home.

After all, it’s not technically your home until you’ve paid the mortgage in full.  Until that time, you AND the bank own the home.  So if you don’t hold up your end of the bargain, the bank could come knocking.  And the news won’t be good!

The legal proceeding is known as a “foreclosure,” and will result in the loss of your home, foreclosure fees, additional legal fees, and possibly a deficiency judgment if your outstanding liens exceed the current value of your home.  Your credit will also be shot when all is said and done.

The foreclosure process usually goes something like this:

You lose your job, become ill, or simply fall behind on your mortgage payments after your adjustable-rate mortgage resets. Unfortunately, these aren’t typically valid reasons to miss your mortgage payment(s).

When you originally applied for your mortgage, you probably verified asset reserves to prove to the bank that you could afford to pay the loan for a certain period of time, even if you failed to receive additional income for some period of time.

Once you miss your first payment, the bank or lender will hit you with a 30-day late. At this point your credit will take a huge hit (how long does a foreclosure stay on your credit), and a representative from the bank or lender may call you, or send you a notice in the mail regarding your failure to pay on time.

The bank or your loan servicer may also discuss a forbearance plan with you to resolve the missed payment and get you back on track. This is basically a special payment plan the bank/servicer sets up with the borrower to either lower payments or suspend payments so you can continue paying your mortgage.

Alternatively, there’s the possibility you could take advantage of a special refinancing or loan modification program to make your payments more affordable going forward. But you will still need to prove to them that you’ll be able to handle the new financing terms.

If you fail to speak with your lender/servicer, and continue to miss mortgage payments, you will be hit with a 60-day late, followed by a 90-day late.  That will impact your credit pretty significantly, and any chances of refinancing or seeking a forbearance plan may be lost.

Once you hit the 90-day late mark, the bank or lender will send a Notice of Default. The NOD essentially states that you have 30 days to make the payment current, appear in court, or face the risk of a foreclosure. If 30 days go by and you fail to appear in court or make your payments current, the court can schedule an auction to sell your home within 7 days.

If the auction ends without a buyer, the bank or lender will gain ownership and likely perform maintenance on the property, clear up any title issues, then put it on the market.

After paying legal fees, foreclosure fees, late fees, and losing your home, you’ll be hit with a huge ding on your credit report. A foreclosure will drop your credit score dramatically and prevent you from borrowing from A-paper banks for many years to come.

Various Ways to Stop a Foreclosure

The scenario above is just one way late mortgage payments can end in foreclosure.  Luckily, there are a number of ways you can stop foreclosure, though not all of them will allow you to keep your home. They include:

– Forbearance Plan
– Partial Claim
– Pre-Foreclosure Sale
Deed in Lieu of Foreclosure

Loan Modification
Short Refinance
Short Sale

As I mentioned above, a refinance may ease payments and get you back on track. But you will need to qualify and exhibit the ability to make the payments.

Your bank may also be able to save you from foreclosure by putting you on an interest-only home loan or a shorter-term ARM to lower the monthly mortgage costs.  Ironically, these will reset in the future and could land you back in a tough spot.  However, it would buy you some time to get back on your feet.

A forbearance plan is a payment plan set up by your lender/servicer to ease or even suspend payments until you are current again.

A partial claim allows the mortgagee to advance funds to the mortgagor (the borrower) in the form of a promissory note. So long as you are not delinquent over 12 months, HUD may grant you a partial claim (for FHA loans), which will bring your mortgage payments current. It is essentially a second mortgage behind your existing lien that collects no interest, and is not due until you pay off your first mortgage or sell your home.

A pre-foreclosure sale, such as a short sale, will help you avoid a foreclosure, but unfortunately at the cost of selling your home, likely for much less than it’s worth.  It will also ding your credit in the process.

One final option is a deed in lieu of foreclosure, which allows you to sell your home back to the bank that financed your mortgage. It is a great way to avoid foreclosure proceedings, but again results in the loss of your home.

It must be voluntary, and both parties must act in good faith. The bank/lender must buy the property for at least fair market value, but will usually not proceed if that value exceeds the existing liens.

Contact a local HUD approved counselor for help in foreclosure matters. Click the following link for a list of HUD Approved Housing Counseling Agencies.

One final thing to note is that despite all the available, regulated, and honest means available for saving your home from foreclosure, many foreclosure scams are also prevalent.

These scam artists will do their best to contact you during pre-foreclosure to rip you off using a variety of tactics including bait and switch schemes, equity skimming, fake bailouts, and overpriced help that leads nowhere. So always do your due diligence when seeking foreclosure help to avoid making matters even worse.

Read more: How long after foreclosure can I purchase a home?


  1. Lisa Steele July 11, 2015 at 7:26 pm -

    I am over a year behind on my mortgage. I do not want to lose my home. I have been working with the lender to try to rectify the situation. However I received a auction letter in the mail which made me really panic. what can you do to help

  2. Colin Robertson July 15, 2015 at 11:43 am -


    Your lender/loan servicer should be the one helping you out. Be sure to stay in close contact with them and/or explore loan modification programs such as HAMP to see if you can avoid losing your home. The Making Home Affordable phone number is (1-888-995-HOPE). It may help. There are also state housing agencies ( that could provide assistance. Good luck!

  3. marcey allard August 19, 2015 at 12:34 pm -

    can you help

  4. Colin Robertson August 20, 2015 at 9:29 am -


    I only write about potential solutions.

  5. Heather September 13, 2015 at 8:57 pm -

    My company buys houses for cash we are connected nationally. It might be a solution for you to contact us and avoid years of damage to your credit.

    I’ve been through this situation myself, and I wish I would have known about some of my options when all the banking options ran out.

    Please feel free to contact me, I would be happy to see if there is a possible solution for you.

  6. christl September 17, 2015 at 9:51 am -

    My father is dying from Cancer and the bank is foreclosing. Can he stay until he passes?

  7. Colin Robertson September 17, 2015 at 11:25 am -

    Hi Christl,

    Sorry to hear that. You may want to contact the bank/loan servicer to see what they can do to accommodate him.

  8. Laura conklin September 22, 2015 at 8:53 am -

    Hi Colin,

    My boyfriend has been dealing with his mortgage company’s 3rd party people for months now. He had spoke to a woman who “Supposedly” modified his loan for him and dropped the payments and just extended the length of years to pay the house off. He is constantly working and never paid attention but he sent in the payments and 3 months found out that they weren’t accepting them and had sent them back. The woman who made the modification didn’t make it and now according to the 3rd party company doesn’t exist. They are giving him information he needs last minute and making it impossible for him to do the modification. They are putting the house up for sale Sept. 25, 2015…Friday. Is there any way to avoid this other than filing for bankruptcy?

  9. Colin Robertson September 22, 2015 at 11:56 am -


    Might be a question for an attorney or a complaint with the CFPB or similar agency as it’s a very serious matter involving the loss of a home.

  10. Charles Givens October 19, 2015 at 7:32 pm -

    My wife and I started making payments in August of 2005. We paid each and every month on line and was 2-3 weeks early on every payment we ever made. In June of 2013 the mortgage company locked us out of our online account with no explanation. I called them and asked them why are we locked out from making our monthly payments. The response was it was in legal. I asked why and they said that they couldn’t tell me. I asked them can we still pay on our loan and they said no because it is in legal. At this time they stopped all monthly statements that were being mailed each and every month. I would keep in contact with them each month asking them why is it in legal and can we make a payment. Same answer as before. I went to bank and even tried to pay it at their branch. Again I was told by the bank itself, we can’t take your payment. Now here we are over 2 years of them not wanting to except our payments to where they are foreclosing on us. I had to retain a lawyer to help us with everything that happened to us. They finally sent a letter to our lawyer stating that they locked up our account and refused our payments because of some type of description problem. Now they want the payments that they wouldn’t take from us before or we face foreclosure. Do we as consumers have a chance to go after them for wrong doing and or have a chance to make them stop the foreclosure. We have proved that we we’re never late not even 1 time and as stated before we never missed a payment. Not sure if we would have any legal recourse against the mortgage lender. Any information will greatly help us. Thanks.

  11. Colin Robertson October 20, 2015 at 3:16 pm -


    Sounds like a question for your lawyer…good luck.

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