When a borrower falls behind on their mortgage payments, their account is referred to the loss mitigation department. The loss mitigator will try to work out a plan to avoid foreclosure. Usually this starts with an offer of a forbearance, which takes the delinquent loan amount and spreads it out over the next 12-24 months. Sometimes, they will look to modify the loan by refinancing the loan internally with new payments and terms. Other special arrangements may be possible depending on the lender.
It is important to note that the proposals which most lender & servicer loss mitigation and workout departments devise for borrowers who are behind on their mortgages often entail paying substantially more on their mortgage each month for 6 to 12 months or more. In many cases, especially if borrowers act early, it may be possible to refinance, consolidate debt, and obtain a lower total monthly payment for an equivalent period of time. Combined with simulataneous credit repair, the increased monthly cash flow from debt consolidation can make cash out refinancing an excellent tool to get back on your feet more quickly than most lender loss mitigation alternatives for many borrowers.
Lenders may not accept a single month's payment when you are more than 1 payment past due. It is important to contact your loan servicer as soon as you feel you are going to fall behind on your mortgage payments.