Facing Foreclosure? What Can You Do Next?

Falling behind on mortgage payments raises immediate questions. How much would it take to bring the loan current? Could a repayment arrangement or loan modification make the payments manageable? Would refinancing be possible, or would selling leave you with money to move forward? The answers depend on your loan, your finances, the property’s value, and the time remaining before a trustee sale.

A Notice of Default begins California’s formal nonjudicial foreclosure process; a Notice of Trustee Sale announces a scheduled auction. Contact your mortgage servicer promptly about options for keeping the home, and confirm the current sale date directly with the trustee. Gather your notices, recent loan statements, and correspondence so those discussions start with accurate information. An old sale date or an expected postponement is not enough to plan around.

Options That May Help You Keep Your Home

Reinstate the Loan: Cure the Default

Reinstatement generally means paying the overdue payments and required charges to bring the existing loan current, rather than paying off the entire mortgage. Ask your servicer or trustee for a written reinstatement quote, its expiration date, and payment instructions. For example, if the quote totals $18,000, paying that amount within the applicable deadline may cure the payment default while you resume regular payments. Confirm the deadline and obtain written confirmation that the default has been cured.

Finding the Money to Bring the Loan Current

Reinstatement may be possible using savings, a gift or loan from family or friends, or proceeds from selling another asset. For example, an $18,000 reinstatement amount might be covered by $8,000 in savings and $10,000 in family assistance. A home-equity loan or other borrowing may also provide funds if you qualify, but its costs and added payments must fit your budget. Confirm the written reinstatement amount and deadline first, and consider whether you can afford the regular mortgage payment and any new debt after catching up.

401(k) Loans and Retirement-Account Withdrawals

Some employer retirement plans allow loans or hardship withdrawals, and preventing foreclosure on a principal residence can qualify as a hardship. Availability, documentation, and processing time depend on the plan. A plan loan must be repaid; a withdrawal reduces retirement savings and may create income taxes and an additional early-distribution tax. Ask the plan administrator and your tax adviser about the amount you could actually receive, the timing, and the consequences before relying on retirement funds.

Repayment Plans, Forbearance, and Payment Deferral

Your servicer may offer a repayment plan that spreads missed payments over time, temporary forbearance that reduces or pauses payments, or an eligible deferral that moves arrears to a later payoff date. These arrangements do not automatically erase the debt. Ask how missed payments will be repaid and whether the resulting payment fits your budget.

Loan Modification

A modification changes the existing loan’s terms and may make payments more manageable through an adjusted interest rate, a longer repayment term, or another permitted change. Eligibility depends on the loan, hardship, and servicer’s program. Request the application requirements and submit complete documentation promptly.

Refinancing

Refinancing uses a new loan to pay off the existing mortgage. It may be possible when your income, credit, equity, and the time available meet a lender’s requirements, but missed payments can make approval harder. Compare closing costs, the new monthly payment, and total borrowing costs. A refinance application alone does not stop foreclosure.

Reverse Mortgages for Eligible Homeowners

A reverse mortgage may offer another way to keep the home when an eligible homeowner has sufficient equity. FHA-insured Home Equity Conversion Mortgages generally require borrowers to be at least 62, and the existing mortgage must be paid off at closing using loan proceeds, other funds, or both. The loan generally does not require monthly principal-and-interest payments, but the homeowner must continue meeting occupancy, property-tax, insurance, and maintenance requirements. A qualified lender and HUD-approved reverse mortgage counselor can evaluate eligibility, costs, available proceeds, and whether closing is feasible before the foreclosure deadline.

Loan-Specific Assistance and Partial Claims

The options available can depend on whether your loan is FHA-insured, VA-guaranteed, USDA-backed, or owned by Fannie Mae or Freddie Mac. For eligible FHA borrowers, a partial claim can address overdue payments through a separate subordinate obligation rather than requiring immediate repayment of all arrears. An FHA payment supplement may also provide temporary payment relief when the program’s requirements are met. Ask your servicer to identify your loan type and evaluate the assistance programs available for that loan, including when any deferred amounts become due.

Chapter 13 Bankruptcy and Other Legal Relief

Chapter 13 bankruptcy may stop a foreclosure proceeding and allow an eligible homeowner to catch up on missed mortgage payments through a court-supervised repayment plan. Regular mortgage payments generally must continue, and the homeowner needs sufficient income to meet the plan’s obligations. A bankruptcy attorney should evaluate eligibility, filing deadlines, prior filings, and whether the protection would apply to the particular sale. Separate foreclosure counsel can also assess servicing errors or legal violations that may support relief; neither a dispute nor an intended filing should be assumed to stop an auction.

How I Help You Evaluate a Sale

Before recommending a listing, I examine comparable sales, the property’s condition, current competition, and the time available to market the home and close escrow. I prepare an estimated seller net sheet showing what could remain after mortgage payoffs, other liens, and selling costs. For example, an $800,000 sale with a $600,000 mortgage payoff leaves $200,000 before those additional deductions. I explain the pricing, preparation, and closing schedule I recommend so you can assess whether a sale is practical and what it could accomplish. If proceeds would fall short, a short sale requires lender approval. Listing the property or accepting an offer does not itself stop a trustee sale.

Deed in Lieu of Foreclosure

If keeping the home and completing a sale are not feasible, the lender may consider accepting a voluntary transfer of ownership through a deed in lieu of foreclosure. This avoids the foreclosure sale but means giving up the home. Approval depends on the lender’s requirements and issues such as other liens. Have separate legal and tax advisers review the written agreement, any remaining debt, and potential tax consequences before committing.

Take the Next Step Early

Contact your mortgage servicer about home-retention options and confirm any scheduled sale directly with the trustee. A HUD-approved housing counselor can help you prepare for those discussions; separate counsel can address legal questions. My services here are real estate sales representation, not legal representation or mortgage origination. Contact me to discuss your property’s value and selling options.

Homeowner resources: California Attorney General: foreclosure prevention options · California DRE: Homeowner’s Guide to Foreclosure