The worst thing you can do if you are having trouble paying your mortgage is nothing.

Learn your options before you act further. Make good decisions. Get a free consultation to evaluate your best options. Our counselors are trained to help you consider your available options and make your own decision.

Loan WorkoutLoan ModificationShort SaleRefinanceDeed-in-Lieu of ForeclosureBankruptcyOther Alternatives

Loan Workout

If you experience difficulty paying your mortgage, you should immediately contact your lender or a housing counselor to try and work something out. If you just need a little time to get back on your feet, your lender may agree to a loan workout plan to temporarily reduce or suspend your payments, allow you to repay what's past due in monthly installments, or provide some other type of relief.

Loan Modification

Even if your financial difficulties are severe and long term, you should contact your lender or a housing counselor. Your lender may agree to a loan modification to permanently change one or more of your loan terms. A loan modification may involve a reduction of your interest rate, an extension of your loan term to 40 years, a reduction in your loan balance, or other changes to the terms of your loan - making your mortgage payments more affordable. Your lender may participate in the government-subsidized Home Affordable Modification program which gives monetary incentives to both lenders and borrowers for modifying certain distressed loans.

Short Sale

Another way to handle a distressed loan is to sell your property. Selling, however, may be challenging if you're "upside down", which means your unpaid balance is more than your sales price. Even so, your lender may voluntarily agree to a short sale by accepting a loan payoff of less than what's owed. As with foreclosure, a short sale may affect your credit, tax liability, personal liability, and pose other consequences. With a short sale, however, you can avoid what some people perceive as a stigma of foreclosure. Doing a short sale also allows you to take a proactive approach to dealing with your distressed loan, rather than go through what can be an agonizing wait for the foreclosure process to run its course.


If you cannot do a loan workout or loan modification with your existing lender, you may still be able to refinance your loan with your lender or another lender. Although low FICO scores, low appraisals, and the lack of income are common obstacles to refinancing distressed loans, whether you qualify for a refinance depends on your individual circumstances. You may also be eligible for federal assistance through the Home Affordable Refinance program for up to 125% of the property's value if you currently have a Fannie Mae or Freddie Mac loan. There is also the Hope for Homeowner program for a FHA-insured fixed-rate refinance up to 96.5% of the property's value (other terms apply).

Deed-in-Lieu of Foreclosure

A deed-in-lieu of foreclosure is a voluntary agreement between a borrower and lender for the borrower to give title to a property to the lender in full satisfaction of the loan secured by that property. Your lender may look favorably at a deed-in-lieu of foreclosure because it will not have to spend time and money pursuing foreclosure.


Bankruptcy is a federal court proceeding for settling your debts with your creditors under a judge's supervision. If you face foreclosure, the filing of a bankruptcy case may provide an "automatic stay" to temporarily stop the foreclosure proceedings. If, however, you file for liquidation under Chapter 7 of the Bankruptcy Code, the court may, in time, lift the automatic stay to allow the mortgage lender to resume its foreclosure proceedings. Alternatively, if you file under Chapter 13, you may be able to keep your property, but you must generally repay the overdue amount in a three-to-five year plan along with your regular mortgage payments.

Other Alternatives

There are many other alternatives to foreclosure. You may be able to borrow money from family or friends. You may be able to supplement your income by renting out a bedroom or getting a second job. You may have a struggling small business that qualifies for an interest-free, deferred-payment America's Recovery Capital (ARC) loan up to $35,000 from the US Small Business Administration. If your lender fails to follow proper foreclosure procedures, you may be able to file an injunction to stop the process. If you have legitimate discrepancies in your loan documents, you may be able to sue your lender. You may also be able to come up with some other alternatives to foreclosure not mentioned here. For any of these alternatives to foreclosure, carefully consider their pros and cons, including possible credit, tax, legal, and other consequences.


Contact our office at 310-259-6698 or register online for an appointment with one of our non-profit counselors. They have been trained to help you navigatge the best solution for you.

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New Homes and Land Brokers
23670 Hawthorne Blvd., #203 • Torrance, CA 90505
Michael: 310.259.6850 • Peter: 310.259.6698
Fax: 310.378.5124

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