Workout Program

• A mortgage workout program is a situation in which your mortgage lender allows you to negotiate terms to help you stay in your home and keep your existing mortgage. For example, the lender may offer to change the interest rate on your loan or give you some time to get caught up on your late payments. This program could provide you with a lower mortgage payment, which could allow you to avoid foreclosure on your home.
  
  

Why It Is Offered

• The purpose of a mortgage workout program is to provide you with the opportunity to remain a customer of the lender. Most of the time, the mortgage lender wants to keep you in your house because it allows you to continue making payments to them. If you cannot afford to make payments anymore, the lender loses out on the interest that you would have paid. It makes more financial sense for the lender to concede a little bit of profit instead of losing it all through a foreclosure.
  
  

How to Initiate

• When you receive a late payment notice from your mortgage lender, or a notice of default, it is time to take action. At that point, you need to call the mortgage lender instead of waiting. If you wait longer, it may be too late to fix the problem, and your house could be foreclosed on. You can ask to talk to the loan mitigation department about a loan modification or workout. Then a representative from the lender will work with you to get you set up in the program.
  
  

Negative Impact

• Even though this approach is much better for your credit than going through a foreclosure, it will still negatively impact your credit. You are not fulfilling your obligations that you originally agreed to when you signed the mortgage. Most lenders will report this to the credit bureaus, and it will lower your credit score a bit. The impact of a mortgage foreclosure would last much longer and be more significant; so if you are in financial trouble, this option makes more sense to pursue.