Foreclosure

• Foreclosure is a legal process that allows a lender to take the collateral it was assigned as part of the mortgage -- namely, the house. The lender will then sell the house to claim the value in the place of a mortgage. However, lenders rarely get enough money to replace the money they would have earned on the loan, so they are often willing to come to a mutual agreement with the borrower that avoids foreclosure entirely.
  
  

Postponement

• A common type of mutual agreement leads to a postponement of the foreclosure. This means that the lender will back down from seeking a foreclosure solution through escrow or a court order and instead agree to delay required payments for a time, usually no more than one year. This agreement, often called a forbearance, is designed to help borrowers get back on their feet and able to make payments again after dealing with other problems.
  
  

Modification

• Other types of mutual agreements lead to a more permanent mortgage modification. This modification changes the loan length, interest rate or other key parts of the mortgage to lower monthly payments so the borrower can keep paying. The borrower agrees to accept the modification and keep paying, while the lender agrees to hold off on the foreclosure, although a trial period of several months is often required as part of the arrangement.
  
  

Foreclosure Dates

• Borrowers should remember that just because a lender has signed a mutual agreement does not mean the lender has fully stopped the foreclosure. The foreclosure date is often still in effect, which means that the lender can keep to the foreclosure sale if the borrower continues to not make payments or breaks the agreement in another way. It is not necessary to start the foreclosure proceedings over, and even a postponement of the date will only provide a few months for the borrower to keep to the arrangement before the lender has a chance to reconsider.