Everybody takes a mortgage with the intention of paying it in full. However, unforeseen circumstances like medical bills, job layoffs, divorce, or property loss can leave one overwhelmed and unable to pay the mortgage. Missing the mortgage payment for a few days doesn’t have severe consequences, but failure to pay by the end of the grace period can put you in danger of foreclosure.

So, if you’re in danger of defaulting your house payment or you’ve already defaulted, you should take immediate action to save your home from foreclosure. There are a few options you can use to evade losing your property. But first, understanding what the foreclosure process entails is as vital as knowing which option best suits you when avoiding it. So, follow along as we take you through the various ways of preventing foreclosure using a Portland mortgage company.

What Is Foreclosure?

Foreclosure is a legal process taken by your property lender to repossess your home because of failure to pay your mortgage. In this case, the lender demands you vacate the house, and in case the property has depreciated a lot in value than the amount you owe the lender, you might be required to pay the extra amount.

If your loan payment becomes 16 days overdue, the mortgage servicer tries to contact you to agree on a repayment day. If you default the loan for 30 days, repossession attempts begin. Then once 36 days are gone without you making the payment, chances are you might see your loan servicer coming to your home.

Now, the issue comes in when the payment falls 120 days behind. At this point, the lender has exhausted all possible ways of convincing you to settle your debt; therefore, the only option they have is to begin formal foreclosure proceedings. Note that if you didn’t take any action before then to avoid foreclosure, there is a high chance of losing the home, depending on how long you have before the actual foreclosure.

To avoid foreclosure, you should take action once you have defaulted on two subsequent payments. In fact, you should try to contact the property lender. Once you release, you will be late to make the payment and draft a promissory note. Here are the tips to avoid foreclosure.

Reinstate The Loan

Reinstating a loan means you’re allowed to pay the loan in a lump sum, including the principal, interest, and other charges. If you know you will have enough cash on a specific date; you can agree with your loan servicer to give you up to that particular day to make the payment. Plus, most state laws give homeowners a specific period to reinstate, which can buy you some time.

Remember, most lenders aren’t so enthusiastic about pushing hard on foreclosure; they prefer working on a repayment plan with you first. So, be proactive and find how long you have to reinstate.

Loan Modifications

If you can’t pay your current mortgage amount or even in the foreseeable future, you can do a loan modification. This involves changing your loan terms to suit your needs. For example, you can agree with the mortgage lender to lower the amount you pay monthly or increase the amount needed to pay the loan or decide to cut out a certain percent of the interest rate. Some loan servicers even agree to add any past due amounts to the loan. This will help you begin the repayment fresh without thinking of any interest incurred in the past due to failure to pay the loan on time.

But you have to offer a good reason for your failure to pay the loan. It could be due to job layoff, an accident, or anything that resulted in reduced monthly income. Either way, be quick to take such action to avoid foreclosure.

Repayment Plans

Immediately you realize you can’t make your monthly payments like you used to, you should contact the mortgage lender to work out a repayment plan. Also, if you had defaulted on the loan and then re-establish your financial situation, you can use this option to catch up on your loan or a promissory note you had written. Either way, talk to your loan provider to agree on new terms of payment.

So, most loan servicers will take the mortgage amount payment missed, divided by a specific time agreed upon, then add it to the current mortgage amount. For example, if you missed paying for four months, the lender will take the amount not paid within those four months, divided by the time agreed on your repayment plan, then you should pay that amount together with your monthly payment.


With increased foreclosures, many mortgage lenders are willing to adjust loan payment terms to your favor. Therefore, if you’re experiencing a short-term financial hitch or a sudden decrease in income, this could affect your mortgage payment. So, it would be best if you talked to your lender as soon as possible, and they may grant you a forbearance.

Forbearance is when your lender agrees to lower the payment or temporarily suspends the fee for a specified period, depending on the validity of your reason. In fact, you could coordinate with the lender to stop your loan payment for a certain number of months, and in turn, you promise to make full payment at the end of that period.

For example, a Portland mortgage company gives the borrowers up to six months to get their finances in order before you can restart the payment process.

Go For Refinancing

If you can get a refinance deal and pay off the old loan, well and good. This is an opportunity to start fresh. If you choose to refinance, some lenders even decide to pardon a part of the debt and refinance the outstanding sum into a new loan.

In addition, some states allow the right to “redeem” the mortgage via refinancing you till the period of the foreclosure auction. But this option might prove difficult because of the bad credit caused by late payment or pending foreclosure.

File For Bankruptcy

If you have no means of paying your mortgage at all, filing for bankruptcy might help you. In the world of mortgages, there are two types of bankruptcy: chapter 13 and chapter 7. With chapter 7 bankruptcy, you will only be able to stop foreclosure for a couple of months, but chapter 13 can help you do away with foreclosure for good. But it doesn’t mean all those that file for chapter 13 bankruptcy are successful. It all depends on how bad your situation is.

Remember, it’s not advisable to file for insolvency just to postpone a foreclosure. But in case you have many outstanding debts that you can discharge (eliminate) using this method, then filing for bankruptcy makes sense.

You need to talk to a bankruptcy lawyer to help you understand all the advantages and disadvantages of filing for either type of bankruptcy during a foreclosure.

Make A Short Sale

Some lenders are willing to let you sell the house for a price lower than the outstanding loan to avoid foreclosure. If this happens, then the amount you get from selling the home goes to the lender, and they might decide to forgive the remaining debt.

Talk to a reputable real estate agent with experience in short sales to help with the whole process because you must obtain bank approval. If this is your only way out, then, by all means, go for it.

Consider Deed-In-Lieu of Foreclosure

This is where you decide to hand over the house voluntarily to avoid foreclosure. But before you agree to sign on the property handover document, you must agree with the lender, in writing, that they will not come after you for any deficiency. So, for example, if the property market value is lower than the outstanding loan, they should not ask you for the remaining amount.

But if you had taken a second or third mortgage on the home, this option can not be viable. Seek information first, then you can decide on what to do.

Use Existing Assets

You can settle your mortgage loan using an already existing asset. For example, if you own a second car, jewelry, or even your life insurance policy, all these can be sold to get cash to reinstate your loan. Also, if anyone in your household can get an extra job, use them to earn additional income to help with the loan.

Even if all these ways don’t fully settle the loan, it shows the loan servicer that you’re doing something to pay the loan, and they might give an extra time to pay the loan.

Set Your Priorities Right

Sometimes your inability to pay your mortgage loan may be due to mismanagement of finances. Especially if your income reduces due to sudden events, then it’s time to review your spending habits and set a realistic budget until your situation improves. Eliminate optional expenses like a gym membership, TV cable connection, including any other form of entertainment.

It would help if you also negotiated to reduce other monthly payments on things like credit card debt. The aim is to cut back on spending so that you’re able to keep paying your mortgage loan even when your income goes down. Plus, apart from medical bills, nothing else should be as crucial as retaining your home and avoiding foreclosure to ensure you keep your home.

How Foreclosure Affects You

Foreclosure comes with a lasting impact on you. So, if you can, you should try hard to stop this process. That said, here is how foreclosure affects you.

Ruins your credit score: Foreclosure definitely hurts your credit score, making it hard for you to secure a credit card or loan in the future. And if you get a loan, you might be required to pay higher interest than expected. Additionally, since some employers review your credit score, you might miss getting the job of your dreams due to a bad credit score. Fortunately, foreclosure clears your credit report after seven years, especially if you have not defaulted on other loans.

Tax consequences: People talk about bad credit scores regarding the harmful effects of foreclosure; however, they forget to mention tax consequences. With a foreclosure, you’re likely to be invited for tax assessment since you’re doing a property transfer. In addition, whenever your debt is forgiven, the event is considered taxable. Therefore, you can only avoid paying taxes if the foreclosure was a result of bankruptcy.

Home eviction: Once the lender repossesses your home, it means you need to find a new home. This can lead to stress due to the uncertainty of your following living situation. Foreclosure sometimes leaves people homeless and living in the streets or their cars.


All homeowners should always take all the necessary precautions to protect their property from foreclosure. But first, learn your rights as a borrower, then avoid all situations that might cause it. Certain risks increase the chances of foreclosure, such as having excessive debt, exotic mortgages, failure to have insurance, insufficient emergency resources, and going for a house you can’t afford to pay.

Another thing, shop around for the best deals on mortgages. Go with a lender offering the lowest interest rates but doesn’t have hidden charges. Also, take a mortgage with the most extended payment period, but if you can pay faster, the better because it means the interest rate will reduce. Finally, plan your repayment method ahead of taking the mortgage to avoid any defaults unless something happens along the way that makes you unable to pay.

So, in case of particular occasions and unavoidable setbacks that may deter you from making the regular monthly payment, using the above tips should help you avoid foreclosure. Most importantly, talk to your loan servicer ahead of time if you feel you will be late to make the payment. This may help prevent a lot of interest as well. Remember, most lenders aren’t interested in foreclosing on your home unless you leave them with no other choice.

If you’d like to start the process of getting a home, come see us at the Tammi Lindley Team. We are Portland’s premier mortgage lenders, offering hundreds of mortgage products so you can pick the mortgage that matches your needs. Contact us today and start the process of owning your dream home.