Avoiding Foreclosure 

Identifying the Early Warning Signs and 

Pursuing Alternatives to Foreclosure 

Brought to you by 
Avoiding Foreclosure 

The last thing any homeowner wants to think about is losing their family’s 

home. But, by understanding the foreclosure process and what often 

leads to it, you can put yourself in a better position to address potential 

problems before they impact your ability to make your mortgage payment 

on time. Plus, if you find yourself struggling to make your mortgage 

payments, there is help available. 

Recognize Early Signs of 

Financial Trouble 

Sometimes, the unexpected challenges of life can make 

the responsibility of homeownership a tough one. If 

you’ve lost your job, been through a divorce, or suffered 

an illness, you may be having a difficult time making your 

mortgage payments. Perhaps you’re anticipating a steep 

increase in your mortgage payments. If you foresee that 

you could have trouble making future mortgage payments, you must act immediately to seek solutions. 

Get The Right Help Immediately! 

Foreclosure is a legal process by which the lender takes 

back ownership of a mortgaged property (a home) and 

sells it because a loan is in default. 

As soon as you think you may fall behind on a payment, 

call your lender (the company to which you send your 

mortgage payments) and ask to speak with someone 

in Default Management or Loss Mitigation. They will be 

your best resource for finding the solution that’s right for 

your individual situation. When you speak to your lender, 

be honest. Explain whether your financial problems are 

temporary or longer term. 

Nonprofit housing and credit counseling agencies 

are also good resources. They can work with you to 

organize a budget and explore helpful options. To 

speak with a counselor specifically dedicated to helping 

homeowners avoid foreclosure, call the Homeowner’s 

HOPETM Hotline at 888-995-HOPE any time day or 

night. To find a HUD-approved counseling agency 

near you, visit http://portal.hud.gov/hudportal/ 

HUD?src=/i_want_to/talk_to_a_housing_counselor. 

Understand Your Options 

The Making Home Affordable Program 

The federal Making Home Affordable Program was 

created to help homeowners achieve mortgage 

payments that are more affordable now and in the future. 

The program includes three options: the Home Affordable 

Refinance Program (HARP), the Home Affordable 

Modification Program (HAMP), and Home Affordable 

Foreclosure Alternatives (HAFA). 

If you have been struggling to pay your mortgage, or 

anticipate that there may be trouble ahead, Making 

Home Affordable is your best starting point for getting 

help. Act now to determine whether you are among the 

millions of homeowners who will qualify. Visit 

www.MakingHomeAffordable.gov for more information 

and to use the self-assessment tools provided. 

Workout Options to Keep Your Home 

If you are not eligible for the refinance or modification 

options available through the Making Home Affordable 

Program, work with your lender to consider other 

traditional workout options: 

 Refinance: If you have enough equity in your home, 

your new mortgage could pay off the old loan along 

with any late fees and attorney fees. 

 Reinstatement: With this option, you can make a 

lump sum payment to catch up by a specific date. 

 Forbearance: For a short period of time, you can 

pay less than the full amount of your mortgage with 

the understanding that another workout option may 

be used to bring your account current. 

 Repayment Plan: This option will allow you to catch 

up over a short period of time by paying a little more 

than your original monthly mortgage payment. 

 Loan Modification: The lender may be able to 

restructure your mortgage by adding missed payments 

to your mortgage, adjusting your interest rate, or even 

extending the number of years you have to repay. 
 

If You Can No Longer Afford to Keep Your Home 

If you cannot or do not want to keep your home, 

your mortgage company can work with you to avoid 

foreclosure. Available options depend on your financial 

circumstances and include: 

 Short Sale: If you can sell your house, but the sale 

proceeds are less than the total amount you owe 

on your mortgage, your lender may agree to a short 

sale and write off the portion of your mortgage that 

exceeds the net proceeds from the sale. 

 Deed in Lieu of Foreclosure: The lender may 

accept the voluntary transfer of the title of the home 

back to them in exchange for cancellation of your 

mortgage debt. 

 Assumption: This option permits a qualified buyer 

to take over your mortgage debt and the mortgage 

payments, even if the mortgage was originally 

non-assumable. 

Don’t Walk Away, and Don’t 

Give Up; Avoid the Negative 

Effects of Foreclosure 

The results of foreclosure can be devastating: 

 Your credit score would take a big hit. With a foreclosure on your credit history, you will have future 

difficulty borrowing money, renting an apartment, 

and perhaps even getting a job. 

 Finding a new home could be a challenge. Not only 

must you find a place that’s affordable, you’ll also 

need to come up with a rental deposit, which may be 

much higher, based on your credit rating. 

 The interest rates on your credit cards could 

increase as the credit card companies view you as 

an increased risk. 

 If your home has increased in value since your 

purchase, a foreclosure could mean the loss of 

thousands of dollars in equity. 

Take Action to Get Results 

At one time or another, many families experience 

serious financial hardship. Sometimes, even small 

financial problems grow into large ones that can, if left 

unresolved, destroy your good credit and even lead to 

foreclosure. While it’s sometimes difficult to admit when 

you need help, don’t let pride or fear stand in the way of 

finding your solution. If you’re having trouble making your 

mortgage payments, contact your lender or a reputable 

housing counseling organization immediately, and work 

toward finding the right solution for you. 

For More Information 

 Visit www.MakingHomeAffordable.gov to learn 

more about the federal plan to help homeowners in 

danger of foreclosure. 

 For free foreclosure prevention counseling, contact 

the Homeownership Preservation Foundation’s 

Homeowner’s HOPETM Hotline at 888-995-HOPE, 

or visit www.995hope.org. 

 The HOPE NOW Alliance provides free foreclosure 

prevention assistance. Visit FreddieMac.com/ 

avoidforeclosure/workshops.html for events in 

your area, counseling and government resources, 

and more. 

 Not all workout options are the same in terms of their 

impact on your credit score. Visit www.myfico.com 

for more information on the effect of foreclosure and 

workout alternatives on your credit. 

 Avoid scam artists! Learn about common scams in 

your area, and get advice before you enter into your 

next loan agreement. Read more about common 

fraud schemes at FreddieMac.com/avoidfraud. 

 To find a HUD-approved housing counseling agency 

near you, visitTo find a HUD approved housing coun

seling agency near you, visit http://portal.hud.gov/ 

hudportal/HUD?src=/i_want_to/talk_to_a_ 

housing_counselor or call 800-569-4287. Ask 

for help identifying legitimate local services and 

programs that could also provide financial or legal 

support if necessary. 

 “About Homeownership” is the Freddie Mac online 

guide to the homebuying process and successful 

homeownership. Visit the “Avoiding Foreclosure” 

section at FreddieMac.com/avoidforeclosure. 

 The Freddie Mac CreditSmart® curriculum is a 

consumer guide to better credit, money man

agement, and responsible homeownership. Visit 

FreddieMac.com/creditsmart to download 

consumer resources, available in five languages. 

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Source 

Content adapted from Freddie Mac’s award-winning CreditSmart, a multilingual financial education curriculum designed to help 

consumers build and maintain better credit, make sound financial decisions, and understand the steps to sustainable homeownership. 
Brought to you by 

Publication Number 829 n © Freddie Mac, December 2016