What Are the Alternatives to a Foreclosure?

If you are behind on your mortgage, the alternatives to foreclosure that let you keep the home are a repayment plan, forbearance, a loan modification, and, for FHA, VA, and USDA loans, a partial claim or recovery advance that moves your missed payments into a separate zero-interest balance. If you cannot afford the home, a short sale or a deed in lieu of foreclosure avoids a foreclosure sale, though you can still owe the remaining balance unless the lender waives it. You apply for all of them through your mortgage servicer, the company that collects your payments, and federal rules generally bar a servicer from starting foreclosure until you are more than 120 days behind.

Which option fits your situation?

Refinancing rarely works once you are behind; FHA's reduced-paperwork refinance, for example, requires every payment in the prior six months to have been made within the month due. If you are current but expect trouble, ask before you miss a payment; what it means to refinance a mortgage covers costs and equity.

Most programs require a financial hardship, such as lost income or higher living expenses. Permanent options usually start with a trial period of three months of reduced payments, and the change becomes permanent only if you make every trial payment on time.

What does your loan type offer?

Whoever insures or owns your loan sets the menu; your servicer can tell you which applies.

FHA loans. FHA requires servicers to review options in this order:

• A repayment plan of up to 24 months, if you are no more than 120 days behind.
• Forbearance in periods of one to three months, up to 12 months in total.
• A standalone partial claim, if you can resume your current payment. HUD pays the arrears, and you sign a zero-interest second mortgage to HUD, due when you sell, pay off, or refinance the loan, or when the loan term ends. All partial claims on one loan cannot exceed 30 percent of the unpaid principal balance.
• A 30-year or 40-year loan modification, alone or with a partial claim, aimed at cutting your principal and interest payment by 25 percent.
• A Payment Supplement, if even a 40-year modification cannot cut the payment by at least 15 percent. It uses partial claim funds to bring the loan current, then pays part of your principal each month for 36 months without changing the loan terms.

FHA allows one permanent option (a partial claim, modification, or Payment Supplement) every 24 months. If you received one in the past two years, the servicer moves to the options for leaving the home (a COVID-19 recovery or disaster option does not count).

VA loans. VA's Partial Claim Program launched on June 15, 2026, and servicers have until November 28, 2026, to fully implement it, so ask yours whether it is offering it yet. After a three-month trial payment plan, your servicer brings the loan current and VA reimburses it; the amount is repaid when the loan is paid off or refinanced or the home is sold. The law that created it caps a partial claim at 25 percent of the unpaid principal balance (30 percent if you missed a payment between March 1, 2020, and May 1, 2025) and allows one per loan, except after a declared disaster. The home must be your primary residence. VA servicers also offer repayment plans and 30-year and 40-year modifications. If your servicer will not work with you, call VA at 877-827-3702, option 6.

USDA guaranteed loans. You must live in the home. The lender reviews options in this order: a repayment agreement of 3 months or less, special forbearance of up to 12 months of payments, a modification of up to 40 years aimed at a payment near 31 percent of your gross monthly income, and a mortgage recovery advance. The advance pays the arrears and can defer principal, carries no interest, and is due when you pay off the loan or transfer the title; all advances together are capped at 30 percent of the unpaid principal balance.

Fannie Mae and Freddie Mac loans. Freddie Mac's options include forbearance of up to 12 months on a primary residence, repayment plans of up to 12 months, payment deferral (missed payments moved to a non-interest balance due at payoff, sale, or the end of the loan), and the Flex Modification, generally for borrowers at least 60 days behind, with a three-month trial. Fannie Mae offers a parallel set. Bank-held and private loans follow the investor's own programs, but the federal application rules below still apply.

How do you apply through your servicer?

1. Call as soon as you know you will miss a payment. Your servicer must try to reach you by the 36th day of a delinquency and send a written notice describing options by the 45th day. Ask for its loss mitigation application.
2. Send a complete application. Servicers typically ask for proof of income, bank statements, and a hardship explanation. If the application arrives 45 days or more before a scheduled sale, the servicer must tell you in writing within 5 business days whether it is complete and what is missing.
3. Get a written decision. If your complete application arrives more than 37 days before a foreclosure sale, the servicer must evaluate you for every option it offers and send a decision within 30 days. Federal rules do not require it to approve any particular option.
4. Appeal a modification denial. If your application was complete 90 days or more before a sale, you can appeal within 14 days, and the servicer must decide within 30 days.
5. Sign and make every payment on time. A missed trial payment can end the offer.

A HUD-approved housing counselor can help you assemble the application and speak to the servicer for you at no charge. Small servicers are exempt from most of these deadlines but still cannot make the first foreclosure filing until you are more than 120 days behind.

How can you stop a foreclosure that has already started?

The most reliable way to prevent foreclosure is to apply before you are 120 days behind. A complete application received before the servicer's first foreclosure notice or filing blocks that filing until you are denied and any appeal ends, you turn down every offer, or you fail to keep an agreement. These protections generally apply once: if your servicer already reviewed a complete application and you stayed delinquent, a new application does not have to stop the foreclosure. Once foreclosure has started, you still have these options:

• Apply more than 37 days before the sale. A complete application received then bars the servicer from seeking a foreclosure judgment or holding the sale under the same conditions.
• Reinstate. Paying the total past-due amount, including fees and attorney costs, ends the foreclosure. HUD describes this as available up to the sale, but your mortgage or state law can set an earlier cutoff, sometimes a few days before the sale. Ask the servicer for a written reinstatement quote and its deadline.
• File for bankruptcy. A bankruptcy filing triggers an automatic stay that halts the sale. The stay can end after 30 days if you had another case dismissed in the past year, so talk to an attorney first.
• Contest the foreclosure. A defense such as improper notice is raised in court, generally with an attorney.

The steps in a pre-foreclosure procedure show which notices arrive when, and how much time each step leaves.

What if you cannot keep the home?

If the home is worth more than you owe plus selling costs, a regular sale pays off the loan and keeps your equity. If you owe more than the home would sell for, two options end the loan without a foreclosure sale. In a short sale (FHA calls it a pre-foreclosure sale), you sell for less than you owe with the servicer's approval. In a deed in lieu of foreclosure, you sign the home over to the lender. On FHA loans, the lien holders forgive the remaining balance after an approved short sale. FHA pays an owner-occupant up to $3,000 after a successful short sale or up to $3,000 in relocation help after a deed in lieu, and borrowers who meet the terms of a deed in lieu are not pursued for a deficiency. On other loans, ask the servicer to state in the written approval that it waives the remaining balance (the deficiency); without that waiver, you may still owe it.

Both still appear on your credit report. How a foreclosure affects your credit and future options compares them, and how to get out of a mortgage compares the exits by credit, tax, and deficiency risk. For the full foreclosure process and timeline, see what foreclosure is and how it works.