All articles 8 min read

Mortgage Hardship Applications: Documents, Decisions, and Appeals

Applying for help with a mortgage is a process of supplying information and obtaining a decision, not a single phone call. Letters about an incomplete application or an offered option can be difficult to interpret under stress. Keep a dated checklist of requests, submissions, and responses so you can follow the process and identify an unresolved issue.

The questions below use selected Consumer Financial Protection Bureau guidance, adapted and organized by Fynoptic. Source links and the dates displayed by those sources are provided at the end.

I got a letter from my mortgage servicer about my application for help to prevent foreclosure of my mortgage. Can you help me understand some of the terms?

When you apply for help in avoiding foreclosure you are likely to come across words and technical terms that may be unfamiliar to you.

This is another reason why it’s a good idea to get professional help from a HUD-Approved Housing Counseling Agency.

Here are a few common terms you may find when you prepare your application:

Loss mitigation

Loss mitigation refers to the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure. Loss mitigation refers to a servicer’s responsibility to reduce or “mitigate” the loss to the investor that can come from a foreclosure. Certain loss-mitigation options may help you stay in your home. Other options may help you leave your home without going through foreclosure. Loss mitigation options may include deed-in-lieu of foreclosure, forbearance, repayment plan, short sale, or a loan modification.

Hardship

Most loss-mitigation applications require you to describe the change in financial circumstances that is preventing you from paying your mortgage. This is referred to as your “hardship.” A hardship may be unemployment, temporary or permanent disability, uninsured medical expenses for a family member, divorce, death, or other circumstances generally beyond your control that significantly reduce your income or increase your expenses. When you submit your application, you should explain your hardship and be able to provide evidence, such as a copy of a divorce decree or checks you wrote to pay hospital bills.

Investor requirement

After your lender gives you a mortgage, it may sell your mortgage to another investor. If your mortgage has been sold to an investor and you run into trouble making payments, the investor will determine what type of loss-mitigation assistance is available to you if you file a complete application for assistance. Though the new mortgage rules do not require investors to offer alternatives to foreclosure, most investors do so because avoiding foreclosure can reduce their losses.

Tip: You have the right to know who the owner or investor is and how to contact them.

Net Present Value calculation

Investors may use a mathematical formula to figure out if they are financially better off foreclosing on your loan or offering you an alternative that avoids a foreclosure. This formula is called a “Net Present Value” or “NPV” calculation. When you apply for loss mitigation, the investor or the mortgage servicer will generally calculate the Net Present Value of the loss-mitigation options that may be available to you and use that information to determine whether to go through with a foreclosure.

Your servicer might say that you are not eligible for a loan modification because of the Net Present Value or “NPV” result. If so, you have the right to certain information that was used in the NPV calculation and you should check to make sure that information is accurate. If you need assistance understanding the NPV calculation you can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are approved by HUD. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

Trial modification

Under certain circumstances, your servicer may offer to permanently change or “modify” your loan so that your monthly payment is reduced. Usually, your servicer will first put you in a trial modification for a few months to make sure that you are able make the new payment. If you make the trial payments as agreed, your servicer should finish the paperwork to make the change permanent. Your servicer may not start a new foreclosure (or if you are already in foreclosure, may not complete the foreclosure sale) so long as you pay your trial-period payments on time. However, your loan may still be considered delinquent for some purposes during the trial period, because you are making payments that are less than your regular amount.

What happens after I complete an application to determine my options to avoid foreclosure?

It depends on your situation, but there are steps your servicer should usually take to evaluate your application.

Make sure your servicerreceives your complete application more than 37 days before your scheduled foreclosure sale.

Warning: Under CFPB rules, if your servicer doesn’t receive your complete application more than 37 days before your foreclosure sale, your servicer doesn't necessarily have to review your application. However, depending on what type of mortgage you have, your servicer might have to consider your application under other rules.

Your servicer’s response

If your servicer receives your complete application more than 37 days before your scheduled foreclosure sale, you should hear back from your servicer in writing within 30 days. Your servicer may respond to your complete application in three ways:

  • Your servicer may offer you a loss mitigation option. It will also tell you how long you have to accept the offer. This may depend on how long before your scheduled foreclosure sale you completed your application.
  • Your servicer may deny you loss mitigation. If your servicer denies your application for a loan modification it must tell you exactly why you were denied. If your servicer receives your complete application for loss mitigation at least 90 days before a scheduled foreclosure sale, you may also have a right to appeal if you were denied a loan modification.
  • Your servicer may ask for additional documentation or information. You should give the servicer what it asks for as soon as possible to make sure you have all possible foreclosure protections.

Tip

You may want to check with your county clerk’s office or legal services provider to find out how foreclosure works in your area.

Foreclosure

Except in rare cases, your servicer can’t start the foreclosure process until at least 120 days after you become delinquent on your loan. After that, if you aren’t eligible for loss mitigation, or chose not to accept the servicer’s loss mitigation offer, the servicer will usually begin the foreclosure process. The time between the start of foreclosure and the actual foreclosure sale depends on the laws in your state.

Use this checklist for more information on how to avoid foreclosure.

I applied for a loan modification or other options to avoid foreclosure, but was denied help. My lender said I didn't meet the qualifications for help. Can I appeal?

It depends. You can only appeal when you’re denied for a loan modification program.

You can ask for a review of a denied loan modification if:

  • You sent in a complete mortgage assistance application at least 90 days before your foreclosure sale; and
  • Your servicer denied you for any trial or permanent loan modification it offers.

Your servicer does not have to review decisions about other loss mitigation programs like a short sale.

Tip: If you’ve been denied a loan modification and you want to appeal the decision, contact your servicer to begin the process.

Your appeal needs to be submitted within 14 days after the servicer denies your application for a loan modification. The servicer has to assign the review of your appeal to someone who was not responsible for the initial decision and must give you a response in writing within 30 days of your appeal.

If the servicer denies your appeal you cannot appeal further. If the servicer decides to make you an offer after reviewing your appeal, you’re entitled to 14 days to accept or reject that offer.

Sometimes you might be considered for more than one loan modification program. Let’s say your lender denied you one loan modification program, but offered you others. You then appealed the denial, but your lender upheld its original decision. In this case, you would have 14 days from the time your lender upheld this decision to accept the lender’s original offer.

If you have a problem with your mortgage, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

Does my mortgage servicer have to help me avoid foreclosure?

Many mortgage servicers have to work with you to see if you qualify for ways to avoid foreclosure. Your servicer may refer to this as loss mitigation.

Share this 00:00

If you’ve missed payments on your mortgage loan, your mortgage servicer generally must:

  • Try to contact you directly within the first 36 calendar days after you become delinquent.
  • Send you a written notice with both a description of examples of loss mitigation options that may be available to help you avoid foreclosure and also application instructions or information about how to get more information about those options, if applicable. Your servicer has to send this no later than 45 calendar days after you become delinquent on your loan.

Your servicer also must have policies and procedures in place so that they can assign people to be your point of contact within 45 calendar days after you become delinquent on your loan. The people assigned to help you should:

  • Be reachable by phone
  • Respond to your inquiries
  • Give you accurate information about available loss mitigation options to avoid foreclosure and how to pursue those options, including actions you must take to submit a loss mitigation application
  • Have information about any loss mitigation application you have submitted

If you have a problem with your mortgage, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

Sources and further reading

The CFPB source passages are U.S. government work in the public domain. Fynoptic has selected, organized, and adapted the material for this guide, including corrections identified through the additional sources listed above. Sources accessed October 27, 2026. This use does not imply agency endorsement or affiliation.

Back to all articles