To get your home out of foreclosure, you need to act inside the federal 120-day window after your first missed payment: contact your servicer’s loss mitigation department, submit a complete application, and choose the workout option that fits whether your hardship is temporary or permanent. Federal rules force the servicer to pause and review your case once that application is complete, and the options range from catching up on missed payments to modifying the loan to selling or transferring the home on controlled terms. Speed matters, and so does knowing which door to walk through.
The Federal Timing Rules Working in Your Favor
Two rules under Regulation X shape everything else. First, your servicer cannot file the first foreclosure notice or document until your loan is more than 120 days delinquent, counted from your first missed payment.1Consumer Financial Protection Bureau. 12 CFR 1024.41 Loss Mitigation Procedures That is your working window.
Second, the ban on “dual tracking.” If you submit a complete loss mitigation application before the servicer files for foreclosure, the servicer cannot start the foreclosure filing until it has evaluated you, offered whatever options you qualify for, and either received your rejection or exhausted your appeals. If foreclosure has already been filed, a complete application submitted more than 37 days before a scheduled sale blocks that sale until the review plays out. Once the servicer has a complete application in hand, it has 30 days to evaluate you for every available option and send a written decision.2eCFR. 12 CFR 1024.41 Loss Mitigation Procedures
The word doing the work is “complete.” An incomplete application does not trigger these protections, and the servicer can keep moving while it waits on your missing documents.
Read Every Notice Before You Do Anything Else
Pull out every piece of mail from your servicer. Two documents matter most. A Notice of Default tells you how many payments you’ve missed, the total needed to get current, and a cure deadline — typically 30 days or longer depending on your state. An Acceleration Letter is more serious: the servicer is demanding the entire remaining loan balance and moving toward foreclosure.
Which notices you’ve received tells you how far along the process is and which options remain open. Inside the 120-day window, you have the most flexibility. After a foreclosure filing, options still exist but deadlines tighten. Write down every date on every notice.
Call the Loss Mitigation Department
Your first call goes to the servicer’s loss mitigation department, not the regular customer service line. The number is on your mortgage statement or the servicer’s website. Before you dial, gather your loan number, recent pay stubs or other proof of income, a list of monthly expenses, and a clear written explanation of why you fell behind. Get the representative’s name and direct line so you don’t restart from zero each time.
Be direct. Tell them you want to apply for loss mitigation and ask exactly what documents make the application complete. Most servicers request recent tax returns, bank statements, a hardship letter, and proof of current income. Send everything they ask for, in the format they ask for, and keep copies.
Options That Keep the Home
Which option fits depends on whether your hardship is a one-time setback or a permanent change in what you can afford.
Reinstatement
You pay the entire past-due amount in one lump sum, including missed payments, late fees, and legal costs the servicer has already incurred. The loan is current again and foreclosure stops. Call the servicer for the exact reinstatement figure in writing, because it changes daily as fees and interest accrue. This works when you’ve come into money: a bonus, insurance proceeds, a family gift, or the sale of another asset.
Repayment Plan
A repayment plan spreads the past-due amount over several months by adding a portion of the overdue balance on top of your regular monthly payment.3Consumer Financial Protection Bureau. What Is a Repayment Plan on a Mortgage Missed three $1,500 payments? The servicer might add $750 a month for six months until you’re caught up. This works when you’ve hit a rough patch but are now earning steady income. The servicer will want proof you can handle the higher payment.
Forbearance
Forbearance temporarily pauses or reduces your payments for a set period.4Consumer Financial Protection Bureau. What Is Mortgage Forbearance Fannie Mae-backed loans, for example, allow an initial forbearance of up to six months with possible extensions.5Fannie Mae. Forbearance Interest usually keeps accruing, so your balance grows even while you’re not making full payments.
Ask what happens when forbearance ends before you agree to anything. For most loans, the servicer cannot demand that you repay all the missed payments at once.6Consumer Financial Protection Bureau. Every Homeowner Has Options for Coming Out of Mortgage Forbearance You should have alternatives: a repayment plan, a loan modification, or a payment deferral that moves the missed amount to the end of the loan. If a servicer mentions only lump-sum repayment, ask specifically about those alternatives.
Loan Modification
A modification permanently changes your mortgage terms so payments become affordable again. The servicer might lower the interest rate, extend the loan from 20 years to 30 or 40, move past-due amounts to the end of the loan, or in some cases reduce principal. This is often the best long-term fix when your income has permanently dropped.
Modifications take time, sometimes months. Follow up regularly, respond to every document request immediately, and keep copies of everything. Applications stall most often because the borrower didn’t provide something the servicer asked for, and the servicer quietly closed the file.
Options When Keeping the Home Isn’t Feasible
If your income has permanently dropped below what any modified payment could cover, a controlled exit beats letting foreclosure run its course. Both options below usually cause less credit damage than a completed foreclosure and can limit what you owe afterward.
Short Sale
You sell the home for less than the loan balance, and the servicer accepts the proceeds as satisfaction or partial satisfaction of the debt.7Consumer Financial Protection Bureau. What Is a Short Sale? You need the servicer’s approval before listing, and the process involves submitting financial documents, a hardship letter, and eventually a buyer’s purchase contract.
One risk people miss: in many states, the servicer can sue you for the shortfall between the sale price and the loan balance. Before agreeing to a short sale, ask the servicer to waive the deficiency in writing.7Consumer Financial Protection Bureau. What Is a Short Sale? Without that written waiver, you could lose the house and still owe tens of thousands.
Deed in Lieu of Foreclosure
You voluntarily transfer ownership back to the servicer, and the servicer cancels the foreclosure.8Consumer Financial Protection Bureau. What Is a Deed-in-Lieu of Foreclosure This avoids the public auction and usually causes less credit damage than a completed foreclosure. Servicers generally require the property to be in reasonable condition and free of other liens. As with a short sale, ask in writing whether the servicer will release you from any remaining balance.
Chapter 13 as an Emergency Stop
Filing Chapter 13 bankruptcy triggers an automatic stay that immediately halts foreclosure proceedings, wage garnishments, and most other collection activity.9United States Courts. Chapter 13 Bankruptcy Basics Under a Chapter 13 plan, you propose a three-to-five-year schedule to catch up on missed mortgage payments while continuing to make regular monthly payments going forward. A bankruptcy judge must approve the plan, and you need consistent income to fund it.
Chapter 13 is powerful but not a silver bullet. The automatic stay is temporary. If you don’t follow through with the confirmed plan, the servicer can ask the court to lift the stay and resume foreclosure. Bankruptcy also stays on your credit report for years. This is generally a last-resort move, best made with an attorney who handles bankruptcy cases regularly.
Two Traps to Watch on the Way Out
Deficiency Judgments
If your home sells at foreclosure for less than the loan balance, the remaining amount doesn’t automatically disappear. In many states, the servicer can pursue a deficiency judgment for that gap. The same risk applies to short sales without a written waiver.7Consumer Financial Protection Bureau. What Is a Short Sale? State law varies widely: some states ban deficiency judgments, some allow them only after judicial foreclosures, and some limit the deficiency to the difference between the debt and the home’s fair market value. Find out your state’s rules before you sign anything. A one-time consultation with a local attorney can prevent a nasty surprise years later.
Tax on Forgiven Debt
When a servicer forgives part of your mortgage — through a short sale, deed in lieu, modification with principal reduction, or foreclosure — the IRS generally treats the forgiven amount as taxable income. The servicer sends a Form 1099-C, and you’re expected to report it for the year of cancellation.10Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not?
The Mortgage Forgiveness Debt Relief Act, which let homeowners exclude up to $750,000 in forgiven mortgage debt on a primary residence, expired on December 31, 2025, and has not been renewed for 2026 as of this writing.11Internal Revenue Service. Publication 4681 (2025), Canceled Debts, Foreclosures, Repossessions, and Abandonments Legislation to restore it has been introduced but has not passed.
You may still qualify for the insolvency exception. If your total debts exceeded the fair market value of your total assets immediately before the cancellation, you can exclude the canceled amount up to the extent of your insolvency, reported on IRS Form 982.12Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness Many homeowners in foreclosure are, by definition, insolvent, so this exception is worth exploring with a tax professional.
Free Help, and the Scams to Steer Around
HUD-approved housing counseling agencies provide foreclosure prevention counseling at no or low cost.13Consumer Financial Protection Bureau. Find a Housing Counselor Counselors help you understand your options, organize paperwork, and communicate with your servicer. Reach one through the HUD hotline at 800-569-4287 or the CFPB’s online tool.14U.S. Department of Housing and Urban Development. Housing Counseling For legal help, contact your local legal aid organization or your state bar’s lawyer referral service. Many legal aid offices handle foreclosure cases at no cost for qualifying homeowners.
The federal Homeowner Assistance Fund is winding down, with participating agencies closing out awards before September 30, 2026.15U.S. Department of the Treasury. Homeowner Assistance Fund Some state programs may still have funds available through your state’s housing finance agency.
Homeowners in foreclosure are prime targets for rescue scams. The FDIC flags several warning signs of a fraudulent operation:16FDIC. Beware of Foreclosure Rescue Scams
- Upfront fees before any service is provided.
- Instructions to stop paying your mortgage or to send payments to someone other than your servicer.
- Pressure to cut off contact with your lender or housing counselor.
- Requests to transfer your property title.
- Documents with blank spaces to be filled in later.
If something feels wrong, report it to the FTC at ReportFraud.ftc.gov, even if you didn’t lose money.17Federal Trade Commission. ReportFraud.ftc.gov FAQ Legitimate help never asks you to pay before it starts or to stop talking to the people who actually control your loan.