Can't reinstate all at once? You don't have to. Servicers must consider reasonable workout proposals—forbearance, repayment plans, or modifications. Here's how to make a proposal they can't ignore.
A "workout" is any arrangement with your servicer to resolve your delinquency without full immediate reinstatement. It's a negotiated solution that acknowledges you can't pay everything now but demonstrates your ability and willingness to catch up over time.
Servicers are required to evaluate loss mitigation options before foreclosure. Under both federal RESPA (12 CFR 1024.41) and California HBOR, they must consider your proposal and respond within specific timeframes.
Phone calls are easily "lost" or misremembered. A written proposal creates a paper trail. If they ignore it or foreclose anyway, you have evidence of their failure to consider loss mitigation—a potential RESPA or HBOR violation.
Depending on your financial situation, you can propose different types of arrangements:
Temporary pause or reduction of payments while you recover from a financial hardship (job loss, medical issue, etc.).
Resume normal payments plus an additional amount each month to catch up on arrears over 6-12 months.
Permanent change to loan terms—lower rate, extended term, or principal forbearance to reduce monthly payment.
Servicers evaluate workout proposals based on whether you're likely to succeed. Here's how to make a strong case:
Be specific about what happened: job loss, medical emergency, divorce, death in family, COVID impact, etc. Include dates. Show that you understand what went wrong.
What has changed? New job, medical recovery, insurance settlement, family support? Demonstrate that the hardship is resolving or has resolved.
Show your current monthly income and expenses. Demonstrate that you can afford the proposed payments. Vague promises don't work—concrete numbers do.
Don't just ask for "help." Propose exactly what you want:
Evidence that you: (1) understand your situation, (2) have a realistic plan, (3) can demonstrate ability to pay going forward, and (4) are communicating proactively rather than hiding.
Use this template when you need temporary relief due to a short-term hardship.
Use this template when you can afford to catch up over time through increased monthly payments.
Once you send your workout proposal, here's what to expect and do:
While waiting for a response, continue making whatever payments you can afford. Partial payments show good faith and reduce the arrears you'll need to catch up on. Send them separately from the workout letter.
Your credit is likely already affected by the delinquency. A successful workout can help by:
During forbearance, servicers may report differently (as "in forbearance" rather than "delinquent"), though this varies. A completed repayment plan followed by on-time payments will help rebuild your credit over time.
Yes. In fact, the 90-day NOD period is designed partly to give you time to pursue alternatives. You can request a workout or modification at any point before the sale.
However, the further along the process, the more urgency. A complete loan modification application submitted before the NOD triggers stronger protections than one submitted after the Notice of Sale.
You can try again if your circumstances have changed. Under RESPA, servicers must evaluate new applications if you can show a "material change in circumstances"—new income, new job, resolved hardship, etc.
If you were denied for incomplete documentation, resubmit with everything they asked for. If denied for insufficient income, wait until your income situation improves or propose a different solution.
Be very careful. The loan modification industry has a history of scams. Warning signs:
HUD-approved housing counselors can help for free. Attorneys can help but should be transparent about costs and not promise outcomes.
Workout is a general term for any arrangement to cure delinquency—including forbearance, repayment plans, and modifications.
Loan modification specifically means permanently changing your loan terms (rate, term, principal). It's more formal, requires more documentation, and results in a new loan agreement.
You might propose a simpler workout first (forbearance or repayment plan) and pursue a modification if needed for long-term affordability.
A well-structured proposal increases your chances of approval. I can help you analyze your situation, prepare compelling documentation, and negotiate with your servicer.