Dealing With Mortgage Arrears: Your Step-By-Step Options

Mortgage arrears happen when you fall behind on your mortgage payments. This can happen after job loss, reduced income, illness, divorce, unexpected expenses, business problems, or simply because monthly costs have become too high.

If you are in arrears, the most important thing is to act quickly. Being behind on your mortgage does not automatically mean you will lose your home, but waiting too long can reduce your options. The Consumer Financial Protection Bureau recommends contacting your mortgage servicer right away if you cannot pay your mortgage or are worried about missing a payment. It also recommends contacting a HUD-approved housing counselor for free help with foreclosure prevention. (Consumer Financial Protection Bureau)

What Are Mortgage Arrears?

Mortgage arrears are missed or overdue mortgage payments. If your regular mortgage payment was due and you did not pay it in full, the unpaid amount becomes part of your arrears.

Your arrears may include:

• Missed monthly payments
• Late fees
• Interest
• Escrow shortages
• Property tax or insurance advances
• Legal fees if foreclosure has started
• Other servicing or default-related costs

The longer the arrears remain unpaid, the more expensive the problem may become.

Step 1: Do Not Ignore The Problem

It is natural to feel embarrassed or overwhelmed when you fall behind. Many homeowners avoid opening letters or answering calls because they are afraid of what the bank will say.

But silence usually works against you. HUD advises homeowners to contact their mortgage lender as soon as they realize they cannot make payments, rather than assuming the problem will fix itself. (HUD)

Your lender or mortgage servicer may have options, but they usually need information from you before they can review those options.

Step 2: Confirm Who Services Your Mortgage

The company that collects your mortgage payments is called your mortgage servicer. This may not be the same company that originally gave you the loan.

You can find your servicer’s contact information on:

• Your monthly mortgage statement
• Your online mortgage account
• Letters from your lender
• Payment coupons
• Escrow statements
• Foreclosure or delinquency notices

When you call, ask for the loss mitigation department or home retention department. These departments handle mortgage hardship and foreclosure-prevention options.

Step 3: Find Out Exactly How Far Behind You Are

Before choosing an option, you need accurate numbers. Do not guess.

Ask your servicer for:

• The number of missed payments
• Total arrears
• Late fees
• Legal fees, if any
• Reinstatement amount
• Full payoff amount
• Whether foreclosure has started
• Whether a foreclosure sale date has been scheduled
• The deadline to apply for assistance

The reinstatement amount is the amount needed to bring the mortgage current. The payoff amount is the total amount needed to pay off the mortgage completely, usually through a sale, refinance, or other full payoff.

Ask for important numbers in writing.

Step 4: Understand Your Timeline

Mortgage arrears become more serious over time. Your exact timeline depends on your loan, lender, state law, and whether the servicer has already referred the loan to foreclosure.

HUD explains that foreclosure does not happen overnight, but homeowners who have missed payments should contact a HUD-approved housing counselor or call the Homeowners HOPE Hotline for help. (HUD)

The CFPB also states that many mortgage servicers must try to contact borrowers within the first 36 calendar days after delinquency and send a written notice with examples of possible loss mitigation options no later than 45 calendar days after delinquency. (Consumer Financial Protection Bureau)

Do not rely on general timelines alone. Ask your servicer for your exact account status.

Step 5: Write Down Your Hardship

Your servicer may ask why you fell behind. This is often called your hardship.

Common hardships include:

• Job loss
• Reduced hours
• Medical expenses
• Divorce or separation
• Death of a household member
• Disability
• Business income loss
• Temporary emergency
• Increased household expenses
• Natural disaster
• Unexpected home repairs

The CFPB explains that loss mitigation applications often require borrowers to describe the financial hardship that is preventing them from paying the mortgage. (Consumer Financial Protection Bureau)

Be clear about whether your hardship is temporary or long-term. This matters because a temporary hardship may call for one solution, while a permanent income change may require a different plan.

Step 6: Review Your Budget Honestly

Before agreeing to any plan, look at what you can actually afford.

Write down your monthly:

• Income
• Mortgage payment
• Utilities
• Food
• Transportation
• Insurance
• Medical costs
• Childcare
• Credit cards
• Car payments
• Taxes
• Other debts
• Emergency expenses

Do not promise a payment you cannot make. A repayment plan that fails may put you in a worse position later.

Step 7: Ask About A Repayment Plan

A repayment plan may help if your financial problem was temporary and you can now afford your regular mortgage payment again.

With a repayment plan, the servicer may allow you to catch up over time by adding part of the missed amount to your regular monthly payment.

For example, if you are $4,000 behind, the servicer may spread that amount over several months. During that period, you would pay your normal mortgage payment plus an extra amount toward the arrears.

A repayment plan may be a good fit if:

• Your income has recovered
• You can afford more than your regular payment for a while
• You are not too far behind
• You want to keep the home
• The arrears can be caught up within a realistic timeframe

It may not work if your regular payment is already unaffordable.

Step 8: Ask About Forbearance

Forbearance is a temporary arrangement that allows you to pause or reduce payments for a limited period. Fannie Mae describes forbearance as an option for homeowners facing short-term hardship, allowing reduced or suspended payments for a designated period. (Fannie Mae)

Forbearance can help during temporary hardship, but it does not usually erase what you owe. The missed payments still have to be handled later.

Before agreeing to forbearance, ask:

• How long does the forbearance last?
• Will interest continue?
• Will late fees be charged?
• What happens when the forbearance ends?
• Will I owe a lump sum?
• Can the missed payments be deferred?
• Will this affect my credit?
• What happens if I still cannot pay after forbearance?

The exit plan matters as much as the forbearance itself.

Step 9: Ask About Payment Deferral

A payment deferral may move missed payments to the end of the loan or require them to be paid later, such as when you sell, refinance, or pay off the mortgage.

This option may help if your hardship has ended and you can afford your regular payment again, but you cannot pay the arrears all at once.

A deferral may be useful when:

• You can resume regular payments
• You cannot afford a lump-sum reinstatement
• You want to stay in the home
• The servicer offers this option for your loan type

Ask your servicer exactly where the missed payments will go, whether interest applies, and when the deferred amount must be repaid.

Step 10: Ask About A Loan Modification

A loan modification changes the terms of your mortgage. It may adjust the interest rate, extend the loan term, add missed payments to the balance, or otherwise restructure the loan to make payments more manageable.

Fannie Mae lists several options that may help homeowners stay in their homes, including repayment plans, payment deferral, forbearance, loan modification, and other relief options. (Fannie Mae)

A loan modification may make sense if:

• Your hardship is long-term
• Your current payment is no longer affordable
• You want to keep the home
• You have enough income to support a modified payment
• You can complete the required application

Ask whether there will be a trial payment plan, what your new payment would be, whether the loan term will change, and whether missed payments will be added to the balance.

Step 11: Ask About Reinstatement

Reinstatement means bringing the loan fully current by paying the total past-due amount.

This may be possible if you receive money from savings, family help, a bonus, sale of another asset, insurance proceeds, or another source.

Before reinstating, ask for a written reinstatement quote. Make sure it includes the payment deadline and all fees needed to bring the loan current.

Do not send a large payment without confirming the exact amount and payment instructions.

Step 12: Ask Whether Refinancing Is Realistic

Refinancing may be difficult if you are already behind on payments, but it is still worth understanding your options. Some homeowners explore refinancing before they miss payments, while others may not qualify once arrears appear on their credit history.

Refinancing may be difficult if:

• Your credit score has dropped
• You have recent late mortgage payments
• Your debt-to-income ratio is too high
• You have little equity
• Your home needs repairs
• Interest rates make the new payment unaffordable

Do not depend on refinancing unless you have confirmed that you qualify.

Step 13: Consider Selling The House

If you cannot afford the mortgage long-term, selling may be the most practical option. Selling before foreclosure may help you protect remaining equity and avoid a forced sale.

This option may make sense if:

• You have equity
• The payment is no longer affordable
• You cannot catch up on arrears
• You want to avoid foreclosure
• You are ready to downsize
• You need a clean financial reset
• The home needs repairs you cannot afford

If the home sells for enough to pay off the mortgage and costs, the loan can usually be paid off at closing.

Step 14: Compare A Traditional Sale And A Cash Sale

If you decide to sell, you may have more than one path.

A traditional listing may help you get a higher price if the home is in good condition and you have enough time. However, it may involve showings, inspections, buyer financing, repairs, appraisals, and a longer timeline.

A cash sale may be faster and simpler, especially if foreclosure deadlines are close or the house needs repairs. Cash buyers often buy as-is, but their offers are usually lower than retail market value.

Compare:

• Net proceeds
• Closing timeline
• Repair requirements
• Buyer financing risk
• Inspection risk
• Appraisal risk
• Certainty of closing
• Move-out flexibility
• Whether the buyer can provide proof of funds

When arrears are growing, the best offer is not always the highest offer. It is the offer most likely to close in time and solve the problem.

Step 15: Ask About A Short Sale If You Owe More Than The Home Is Worth

If your mortgage payoff is higher than the home’s value, a normal sale may not cover the full loan balance. In that case, you may need to ask the servicer about a short sale.

A short sale happens when the lender agrees to accept less than the full mortgage balance from the sale proceeds.

Short sales require lender approval and usually involve hardship documentation. Before moving forward, ask whether the lender may forgive the remaining balance or pursue a deficiency. This can depend on your loan, state law, and written agreement.

Step 16: Consider A Deed In Lieu Of Foreclosure

A deed in lieu of foreclosure means you voluntarily transfer the property to the lender instead of going through a completed foreclosure.

This may be considered when you cannot keep the home, cannot sell it for enough, and the lender agrees to accept the property.

It is not automatic, and it can still affect your credit and future housing options. Ask whether the lender will waive any deficiency balance and get the terms in writing.

Step 17: Get Help From A HUD-Approved Housing Counselor

A HUD-approved housing counselor can help you understand your options, prepare documents, and communicate with your mortgage servicer. HUD directs homeowners who have missed a payment or are at risk of foreclosure to search for a HUD-approved housing counselor or call 800-569-4287. (HUD)

A counselor may help you:

• Review your budget
• Understand lender letters
• Prepare a loss mitigation application
• Compare options
• Avoid scams
• Communicate with your servicer
• Understand foreclosure-prevention resources

This can be especially helpful if you feel overwhelmed or unsure what the bank is asking for.

Step 18: Watch Out For Foreclosure Rescue Scams

Homeowners in arrears are often targeted by scams. Be careful with anyone who promises guaranteed results, asks for upfront fees, tells you to stop contacting your lender, or pressures you to sign over your deed.

Warning signs include:

• “Guaranteed” foreclosure rescue
• Upfront fees for mortgage help
• Pressure to sign immediately
• Instructions to stop paying your lender
• Requests to transfer title
• Vague promises to “save your home”
• Offers to take over payments informally
• Refusal to put terms in writing
• Discouraging you from speaking with an attorney or counselor

A legitimate professional should explain your options clearly and allow you to get independent advice.

Step 19: Keep Records Of Everything

Documentation can protect you if there is confusion later.

Keep copies of:

• Mortgage statements
• Letters from your servicer
• Foreclosure notices
• Emails
• Upload confirmations
• Fax confirmations
• Certified mail receipts
• Loss mitigation applications
• Pay stubs
• Bank statements
• Tax returns
• Hardship letters
• Notes from phone calls

For every call, write down the date, time, person’s name, department, and what they told you.

Step 20: Make A Decision Based On Reality, Not Fear

Mortgage arrears are stressful, but panic can lead to bad decisions. The right option depends on whether you can afford the home going forward.

If your hardship is temporary and your income has recovered, a repayment plan, deferral, or reinstatement may help.

If your income has dropped permanently, a loan modification may be worth exploring.

If the home is no longer affordable, selling may protect your equity and prevent foreclosure.

If you owe more than the home is worth, a short sale or deed in lieu may be options to discuss with your lender.

Questions To Ask Your Mortgage Servicer

When you call, ask:

• What is my total amount past due?
• What is my reinstatement amount?
• What is my full payoff amount?
• Has foreclosure started?
• Is there a foreclosure sale date?
• What loss mitigation options are available?
• What documents do you need?
• What is the deadline to apply?
• Can I apply online?
• How do I confirm you received my documents?
• Will foreclosure pause during review?
• What happens if I am denied?
• Can I appeal?
• What options exist if I want to sell?

Ask for answers in writing whenever possible.

Documents You May Need For Mortgage Help

Your servicer may request:

• Loss mitigation application
• Hardship letter
• Recent pay stubs
• Bank statements
• Tax returns
• Profit and loss statement if self-employed
• Unemployment or benefit statements
• Divorce decree or separation agreement
• Medical bills or hardship documentation
• Monthly budget
• Homeowners insurance information
• Property tax information
• HOA statements, if applicable

Submit complete documents before the deadline. Missing pages can delay review.

Sample Script For Calling Your Servicer

You can say:

“Hello, my name is [Name], and my loan number is [Loan Number]. I am behind on my mortgage payments and want to understand my options. My hardship is [brief explanation]. I would like to know my total arrears, reinstatement amount, payoff amount, foreclosure status, and what loss mitigation options are available.”

Then ask:

“What documents do I need to submit, what is the deadline, and how can I confirm that my application is complete?”

Before ending the call, ask:

“Can you send me written confirmation of the next steps and deadlines?”

Common Mistakes To Avoid

Avoid these mistakes when dealing with mortgage arrears:

• Ignoring lender letters
• Waiting too long to call
• Guessing your arrears instead of confirming them
• Agreeing to a payment plan you cannot afford
• Missing document deadlines
• Assuming foreclosure has not started
• Sending documents without proof
• Paying a foreclosure rescue company upfront
• Signing over your deed without legal advice
• Refusing to consider selling when the home is no longer affordable
• Accepting a cash offer without proof of funds
• Waiting until the foreclosure sale date is too close

Final Thoughts

Dealing with mortgage arrears is difficult, but you still may have options. Start by contacting your mortgage servicer, confirming the exact amount owed, asking about foreclosure status, and applying for available loss mitigation options.

Depending on your situation, you may be able to use a repayment plan, forbearance, payment deferral, loan modification, reinstatement, sale, short sale, or deed in lieu of foreclosure.

The sooner you act, the more control you may have. Keep records, ask questions, get help from a HUD-approved housing counselor, and choose the option that gives you the best chance of protecting your home, your equity, and your future.