You can save your house from foreclosure by acting inside the window federal law gives you: your mortgage servicer cannot start foreclosure until your loan is more than 120 days delinquent, and during that window (and often after it) you can pursue a loan modification, forbearance, repayment plan, full reinstatement, Chapter 13 bankruptcy, or a sale that pays off the loan before an auction happens. The right choice depends on whether your hardship is temporary or permanent, whether you have cash on hand, and how close you are to a scheduled sale date.
The 120-Day Window and Why It Matters
Before any foreclosure paperwork can be filed, your servicer has to wait until your loan is more than 120 days past due. That’s a federal Consumer Financial Protection Bureau rule and it applies in every state and to every type of mortgage.1Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures The four months exist so you have time to work something out.
The same rules protect you from “dual tracking.” If you submit a complete loss mitigation application before the servicer files the first foreclosure notice, the servicer cannot push foreclosure forward until it has finished reviewing your options, you’ve rejected every offer, or you’ve broken an agreed plan.1Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures Even after foreclosure has been filed, submitting a complete application more than 37 days before the scheduled sale date triggers similar protections that pause the process while your file is reviewed.
The practical point: contact your servicer the moment you know you’ll miss a payment, and get an application in as early as you can. Waiting until the last few weeks before a sale strips most of these protections away.
Work Out a New Arrangement with Your Servicer
Servicers usually prefer an alternative to foreclosing. Foreclosure is expensive and slow for lenders, and that means they’ll often negotiate if you reach out early. Three arrangements cover most situations.
Loan Modification
A loan modification permanently changes the terms of your mortgage to lower your monthly payment. The servicer might cut the interest rate, extend the repayment period, or reduce the principal balance.2Consumer Financial Protection Bureau. What Is a Mortgage Loan Modification This is the right tool when your income has dropped permanently but you can handle a smaller payment. Expect to submit proof of income, bank statements, and a hardship letter.
Forbearance
If your trouble is temporary, a forbearance agreement lets you pause or reduce payments for a set stretch of time. The missed payments don’t disappear, but you get to choose from several ways to catch up when the forbearance ends, and for most government-backed loans the servicer cannot force a lump-sum repayment.3Consumer Financial Protection Bureau. Exit Your Forbearance Carefully Common exits include:
- Payment deferral, where missed payments move to the end of the loan as a non-interest-bearing balance due when you sell, refinance, or pay off the mortgage. Under Fannie Mae and Freddie Mac guidelines, servicers can defer up to six months of missed payments this way, with a lifetime cap of twelve months of deferred payments on a single loan.4Fannie Mae. Payment Deferral
- A repayment plan, where a portion of what you owe is added to your regular monthly payment for several months until you’re caught up.
- A loan modification that folds the missed payments into new, lower monthly terms.
- A lump-sum payment, though again, this typically cannot be required on government-backed loans.
Repayment Plan
If you’ve already fallen behind but your income is stable again, a straight repayment plan spreads the past-due amount across several months on top of your regular payment.3Consumer Financial Protection Bureau. Exit Your Forbearance Carefully It’s the simplest option when you can afford slightly higher payments for a limited time.
Get Free Help from a HUD-Approved Counselor
You don’t have to negotiate on your own. The U.S. Department of Housing and Urban Development certifies housing counselors who help homeowners facing foreclosure at no cost. A HUD-approved counselor can review your finances, tell you which loss mitigation options fit, help you prepare and submit your application, and file complaints if your servicer isn’t cooperating.5U.S. Department of Housing and Urban Development. Housing Counseling Call 800-569-4287 to find one near you.
Reinstate the Loan with a Lump Sum
Reinstatement means paying the full past-due amount in one shot to bring the loan current and stop the foreclosure. You’re not paying off the mortgage, just everything you’re behind on: missed payments with interest, late charges, amounts the servicer advanced for taxes or insurance, and attorney fees already run up in the foreclosure.6Fannie Mae. Processing Reinstatements During Foreclosure
The servicer must accept a full reinstatement even after foreclosure has started. Ask the servicer or its attorney for a reinstatement quote and expect the total to be larger than you think, because legal costs and fee advances add up fast once the case is filed. Payment is by certified funds. Once it clears, the foreclosure is dismissed and you resume normal monthly payments. This works only if you can lay hands on a lump sum (a family loan, a retirement withdrawal, an insurance payout) and keep up going forward.
File Chapter 13 Bankruptcy
When negotiations haven’t worked, Chapter 13 bankruptcy is the strongest legal tool for stopping a foreclosure. The instant you file the petition, the “automatic stay” halts all collection activity, including a sale that may be days away.7Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay
Chapter 13 doesn’t wipe out your mortgage. It lets you cure the default over time through a court-supervised repayment plan while you keep making regular mortgage payments going forward. The bankruptcy code specifically allows you to catch up on a home mortgage default so long as the home hasn’t already been sold at a foreclosure auction.8Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan
The plan lasts three to five years depending on household income. If your income is below your state’s median, the plan runs three years unless the court approves longer. If it’s at or above the median, the plan runs five years.9Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan If you’re $9,000 behind and your plan runs three years, you’d pay roughly $250 a month toward the arrears on top of your regular mortgage payment.
Chapter 13 has caps on total secured and unsecured debt, adjusted periodically. If you’re over the limits, the more complex and expensive Chapter 11 may be your only option. A bankruptcy attorney can tell you quickly whether you qualify.
If You Can’t Keep the Home, Sell Before the Auction
If keeping the house isn’t realistic, selling before foreclosure protects your credit and may preserve some equity. A foreclosure stays on your credit report for seven years from the date of the first missed payment that led to it, and it can block you from qualifying for a new mortgage during much of that time.10Consumer Financial Protection Bureau. If I Lose My Home to Foreclosure, Can I Ever Buy a Home Again?
Traditional Sale
If the home is worth more than your mortgage balance, a standard sale lets you pay off the loan from the proceeds and keep the equity. Your credit takes a hit from the missed payments but avoids the foreclosure entry entirely. The sale has to close before the scheduled foreclosure sale date, so speed matters.
Short Sale
If you owe more than the home is worth, a short sale lets you sell for less than the full mortgage balance with your lender’s permission. You’ll need to show hardship and produce the same documentation as a modification application. Lenders sometimes waive the remaining balance, but not always, and without a written waiver you could face a deficiency judgment for the difference. Get any waiver in writing before closing.
Deed in Lieu of Foreclosure
A deed in lieu is a last resort when you can’t modify the loan and can’t sell. You voluntarily transfer ownership to the lender in exchange for release from the mortgage. Most lenders require that you’ve tried to sell the property with a licensed real estate agent for 90 to 120 days first, and the property must be free of junior liens like home equity loans (or those lienholders must agree to release their claims). A deed in lieu still shows on your credit report and won’t look dramatically different from a foreclosure to future lenders, but it’s faster and cheaper than a full proceeding, and FHA borrowers may be eligible for relocation assistance.11U.S. Department of Housing and Urban Development. FHA’s Loss Mitigation Program
One thing to know before you sign anything: if your lender forgives part of the mortgage balance through a short sale, deed in lieu, or modification with principal reduction, the IRS may treat the forgiven amount as taxable income, though exclusions exist for insolvency, bankruptcy discharges, and (through debt discharged before January 1, 2026) qualified principal residence indebtedness.12Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? Ask a tax professional before you agree to anything that forgives debt.
Watch Out for Rescue Scams
Homeowners facing foreclosure are prime targets for scammers who promise to save the home for an upfront fee. Federal law makes it illegal for any company to charge you fees for mortgage assistance before you’ve actually received and accepted an offer of relief from your lender.13Federal Trade Commission. Skip the Scams as You Look for Options to Avoid Foreclosure Money asked for up front is the clearest warning sign. Others: guarantees that they can stop your foreclosure or get your loan modified (nobody can guarantee that), instructions to stop communicating with your servicer, demands for payment by wire transfer or payment app, and any pressure to sign over the deed to your home.
Legitimate help is free. A HUD-approved housing counselor can do everything a paid “rescue” company claims to do, at no cost.5U.S. Department of Housing and Urban Development. Housing Counseling If someone is charging you for foreclosure help, you’re paying for something you can get for nothing.