Every day, we receive calls from people desperate for help because their mortgages are in default and they fear they will lose their homes. Many factors can lead to missed mortgage payments: unexpected medical bills, reduced work hours, divorce, or death, but a mortgage default does not automatically mean your home will go into foreclosure. The Louisville Urban League Center for Housing & Financial Empowerment offers Foreclosure Prevention Counseling services to guide homeowners who are delinquent on their mortgage obligations. Our HUD-Certified counselors assist clients in reviewing their options and choosing a repayment plan with their mortgage loan servicer that can prevent foreclosure.

Mortgage Loan Modification

A mortgage modification is a permanent change to your home loan terms. Once your lender has been notified of the financial hardship you are experiencing, they may offer a loan modification. The goal is to provide the homeowner with a lower monthly payment, avoid foreclosure, and keep the property. This is a good option for homeowners with an unclear end date for the financial hardship they are experiencing and a mortgage past-due balance of 2 months or less. The homeowner must contact the lender directly to request an application for this program.

Mortgage Loan Forbearance

A mortgage loan forbearance is another option for homeowners. This is an agreement where your loan servicer temporarily pauses or reduces the homeowner’s monthly mortgage payments to assist during a short-term financial hardship, such as a job loss, medical crisis, or natural disaster. The loan will return to good standing; the missed payment(s) or past-due amount will not be erased; they are typically moved to the end of the loan. This is best for homeowners who need a short-term solution to help regain good standing on their mortgage.

Mortgage Loan Repayment Plan

A mortgage loan repayment plan is an agreement made between the lender and homeowner to catch up on missed or past-due mortgage payments. The homeowner will not be required to make a large lump-sum payment at once; instead, the overdue balance is split into smaller portions and added to your regular monthly payments over a set period. This is ideal for homeowners who may not qualify for a loan modification or forbearance plan. The lender may provide this option based on the total past-due balance on the loan and how far along they are in the foreclosure process.

Last Resort Options

A short sale is an arrangement to sell the property for less than the total amount owed on the mortgage. This amount must be approved by the lender before the sale is completed and closed. This will allow the homeowner to relieve themselves of the financial burden of the mortgage and the credit report impact of a true foreclosure. The drawback of this option is that the homeowner will not make any profit from the sale of the property. This is usually a last-resort option for the lender and the homeowner.

A deed-in-lieu is a legal arrangement between the lender and the homeowner that transfers the property deed to the lender. This is used to avoid the typical foreclosure process and allows the homeowner to walk away from the property without significant damage to the homeowner’s credit score. This can be helpful for the homeowner the next time they attempt to purchase another home. This is also a last-resort option for the lender and homeowner.

Where to Get Help

If your mortgage is in default, do not ignore the problem. At the first sign of trouble, contact your lender and our HUD-certified housing counselors to discuss default mortgage counseling. Explore the different mitigation options to determine which will work best for your situation. Know your rights. Federal rules require mortgage lenders and servicers to review loss mitigation options before initiating foreclosure. Avoid foreclosure prevention companies that charge fees for help. The Louisville Urban League’s HUD-certified housing counselors offer default mortgage counseling services at no cost. Learn more on our website.

The Louisville Urban League is dedicated to fostering economic empowerment in order to elevate the standard of living in historically underserved urban communities, with our focus on Jobs, Justice, Education, Health, Housing, and Entrepreneurship.

We provide many services, including job coaching, record expungement, health navigation, financial counseling, and support for small businesses.

For more information call (502)585-4622 or visit lul.org.