If you’ve fallen behind on your mortgage or expect to, you have several loss mitigation options to keep your house: forbearance, a repayment plan, a payment deferral, a loan modification, and — for government-backed loans — a partial claim. Which one fits depends on whether your hardship is temporary or permanent, and how much of a payment you can now afford. Federal rules also give you real protections while your servicer reviews your request, including a bar on foreclosure activity during that review.
The Five Main Ways to Stay in Your Home
Forbearance for a Short-Term Setback
A forbearance temporarily pauses or reduces your monthly payments while you recover from something like a job loss, medical emergency, or natural disaster. It doesn’t erase what you owe. The initial period can run up to six months, with up to six more available if you still need relief, and anything beyond a total of 12 months generally requires the mortgage investor’s written approval.1Fannie Mae. D2-3.2-01, Forbearance Plan
When the forbearance ends, you’ll need a plan for the paused payments. That usually means a repayment plan, a payment deferral, or a modification. Despite what many borrowers fear, a lump-sum payment is rarely expected.
Repayment Plan to Catch Up Gradually
A repayment plan lets you catch up on missed payments over time while continuing your normal monthly payment. Each month you pay the regular amount plus a slice of the past-due balance until you’re current. It works best once the hardship has passed and you can carry a temporarily higher payment.
If you’re 90 days delinquent or less, the plan typically runs up to six months. Longer delinquencies may qualify for longer plans, and anything past 12 months usually requires investor approval.2Fannie Mae. D2-3.2-02, Repayment Plan Because nothing about the loan contract changes, a repayment plan is faster to set up than a modification.
Payment Deferral to Push Missed Payments to the End
A payment deferral moves your past-due principal and interest to the end of the loan as a non-interest-bearing balance. It sits there without growing until you sell, refinance, or reach the loan’s maturity date.3Fannie Mae. D2-3.2-04, Payment Deferral You resume your normal monthly payment right away, with no increase and no catch-up amount.
This fits borrowers who have recovered from a short-term hardship and can afford the existing payment, but who can’t produce a lump sum or handle the higher payment a repayment plan would require.4Freddie Mac. Payment Deferral Solutions For conventional loans backed by Fannie Mae or Freddie Mac, a deferral can resolve up to 12 months of missed payments.
Loan Modification for a Lasting Change in Income
A loan modification permanently changes the terms of your existing mortgage to make the monthly payment more affordable. Your servicer may lower the interest rate, extend the term to as long as 40 years, or both. Past-due interest and escrow shortages are typically folded into the new principal balance, giving you a single lower payment. Because the change is permanent, modification fits a lasting drop in income rather than a short setback.
Before finalizing, most servicers require a trial payment plan — usually three consecutive on-time payments at the proposed new amount.5eCFR. 24 CFR 1005.749 – Loan Modification Miss even one trial payment and you can be disqualified, forcing the process to start over.
Partial Claim for FHA, VA, and USDA Loans
If your mortgage is FHA-insured, a partial claim is one of the most borrower-friendly options available. Your servicer advances enough money to bring the loan current, and that amount becomes a separate, interest-free subordinate lien on your home. You make no monthly payments on the partial claim; the full balance comes due only when you sell, refinance, transfer title, or reach the end of your mortgage term.6U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program The advance covers the arrearage plus certain default-related costs.7eCFR. 24 CFR 203.414 – Amount of Payment, Partial Claims
VA-guaranteed loans have a similar structure: the VA can advance funds to cover the arrearage, with the balance due on sale, refinance, or payoff. USDA Rural Development loans offer comparable tools. Each agency sets its own eligibility rules, so specifics vary by loan type.
Who Qualifies
Every retention option requires proof of a genuine financial hardship that keeps you from making your current payment. Qualifying hardships commonly include a significant income reduction, a serious medical condition, a divorce, or the death of a co-borrower. Your documentation has to connect the hardship directly to the inability to pay; a vague claim of difficulty isn’t enough.
You don’t have to already be behind. If you’re current but can show that an identifiable hardship will keep you from making the next payment — known as imminent default — you may still qualify for forbearance, a modification, or other relief. Federal loss mitigation rules under Regulation X apply to your principal residence only, not to investment properties or vacation homes.8NCUA. Real Estate Settlement Procedures Act (Regulation X)
What to Send With Your Application
The application starts with a standardized intake form, typically called a Uniform Borrower Assistance Form or a Request for Mortgage Assistance form, which your servicer provides through its website or by mail. It asks for a detailed breakdown of your monthly household income and expenses, including housing, utilities, food, transportation, and other debts.
You’ll also gather supporting documents:
- Recent pay stubs, or a year-to-date profit and loss statement if you’re self-employed
- Federal tax returns, typically the most recent two years
- Bank statements for all accounts, usually covering the last 60 days
- A hardship letter explaining what happened and why it affects your ability to pay
- A list of your other outstanding debts, such as car loans, student loans, and credit card balances
Depending on your situation, the servicer may ask for extra items like a divorce decree, a death certificate, or a layoff letter. Submit everything together when you can, because an incomplete package delays the review.
Your Protections While the Servicer Reviews
Regulation X (12 C.F.R. § 1024.41) puts several layers of protection between you and a foreclosure sale while you’re applying for help.
The 120-Day Rule Before Foreclosure Can Start
Your servicer cannot begin foreclosure — meaning it cannot file the first legal notice or court document — until your mortgage is more than 120 days overdue. If you submit a complete loss mitigation application during that window, the servicer cannot start foreclosure until it has evaluated your application, notified you of its decision, and, if denied, allowed the appeal period to expire or resolved your appeal.9eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Acknowledgment, Evaluation, and the Dual Tracking Ban
Once you submit your application, the servicer must send a written acknowledgment within five business days stating whether the file is complete or what’s missing. After receiving a complete application, it has 30 days to evaluate you for every available loss mitigation option and send a written decision.
If foreclosure has already started but you submit a complete application more than 37 days before a scheduled sale, the servicer cannot move forward with that sale while your application is under review.9eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures This is the dual tracking ban: your servicer cannot push toward a sale and negotiate a workout at the same time.
Appeal Rights After a Denial
If the servicer denies you for a loan modification, you have 14 days from the date of the written denial to file an appeal. The foreclosure sale cannot proceed during that appeal window. Miss the 14 days and you forfeit the appeal, so respond quickly if you disagree with the decision.
A Dedicated Contact Person
Federal rules require your servicer to assign specific personnel to you no later than 45 days after you become delinquent. That contact must be available by phone to answer questions about your options, tell you what documents you still need, and update you on the status of your application.10eCFR. 12 CFR 1024.40 – Continuity of Contact They must stay available until you’ve made two consecutive on-time payments under a permanent loss mitigation agreement. If you keep getting passed around, ask for your designated contact by name.
If You Inherited the Home or Received It in a Divorce
You can apply for loss mitigation even if you weren’t the original borrower. Once the servicer confirms your identity and ownership interest, it must treat you as the borrower for all loss mitigation procedures, including the protections above.11Legal Information Institute. 12 CFR Appendix Supplement I to Part 1024 – Official Bureau Interpretations The servicer cannot make you formally assume the loan under state law before it processes your application. If you send in an application before confirmation is complete, the servicer may start reviewing right away or wait; either way, once you’re confirmed, the standard evaluation and response timelines apply.
Two Traps That Can Undo Your Plan
Second Mortgages and Home Equity Lines
Modifying your first mortgage does not automatically affect a second mortgage or home equity line of credit. The holder of that second lien keeps the right to demand payment and, in some cases, to start its own foreclosure. When your first mortgage is modified, the second lienholder may need to agree to stay in a subordinate position, a process called subordination. Refusal or delay from the second lienholder can stall or block your modification. If you carry a second lien, contact that servicer early to learn its requirements.
Tax on Forgiven Mortgage Debt
If your servicer reduces your principal balance or forgives any part of what you owe, the IRS generally treats the forgiven amount as taxable income. Your servicer must send you a Form 1099-C reporting canceled debt of $600 or more.12Internal Revenue Service. Instructions for Forms 1099-A and 1099-C
A special exclusion lets homeowners exclude forgiven mortgage debt on a principal residence from gross income. It covers debt discharged before January 1, 2026, or debt forgiven under a written agreement entered into before that date, and applies to up to $750,000 ($375,000 if married filing separately) of forgiven principal residence acquisition debt.13Office of the Law Revision Counsel. 26 U.S. Code 108 – Income From Discharge of Indebtedness Unless Congress extends this, debt forgiven in 2026 without a prior written agreement will generally be taxable. Even without the principal residence exclusion, you may avoid the tax if you were insolvent when the debt was canceled, meaning your total debts exceeded the fair market value of all your assets. The insolvency exclusion has no expiration date. Talk to a tax professional before accepting any principal reduction.
Free Help From a HUD-Approved Counselor
You don’t have to do this alone. HUD funds a nationwide network of housing counseling agencies that provide free or low-cost help to homeowners facing foreclosure. A HUD-approved counselor can review your finances, explain your options, help you complete the application, and negotiate directly with your servicer.14U.S. Department of Housing and Urban Development. Avoiding Foreclosure Call 800-569-4287 or search the HUD counselor directory online to find an approved agency near you.