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If an adjustable-rate mortgage (ARM) reset makes your payment unaffordable, contact the mortgage servicer immediately and ask for its mortgage-assistance or loss-mitigation team. Explain whether the hardship is temporary or ongoing, submit the requested application and documents, and arrange free help from a HUD-approved housing counselor. Possible solutions include a loan modification, repayment plan, forbearance, refinance, short sale, or deed-in-lieu, but none is automatic and each can affect your payment, total debt, credit, and ability to keep the home.
Do not wait for a missed payment, assume refinancing will be available, or pay a company that guarantees a rescue. If you have received legal papers, obtain state-specific legal advice promptly.
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First, confirm what changed after the reset
An ARM reset changes the interest rate according to the loan’s index, margin, adjustment schedule, and contractual caps. Your new principal-and-interest payment should be shown in the reset notice or a recent statement. The amount due can also change for reasons unrelated to the rate reset, including property taxes, homeowners insurance, or an escrow shortage.
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Review the ARM note and reset notice and write down:
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- The effective date of the new rate.
- The new interest rate and the index and margin used to calculate it.
- The new principal-and-interest payment.
- Any change in escrow, taxes, insurance, fees, or other charges.
- The next adjustment date and the loan’s periodic and lifetime rate caps.
Compare the payment breakdown with your previous statement. If the figures do not make sense, ask the servicer to explain the calculation before deciding what you can afford. The Consumer Financial Protection Bureau’s Consumer Handbook on Adjustable-Rate Mortgages warns: “If you can’t afford the increased payments, you may lose your home to foreclosure.” That is a risk warning, not a prediction that foreclosure will occur in your case.
Call the servicer before the payment is missed
The servicer is the company that receives your mortgage payment and handles assistance requests. Use the telephone number on your mortgage statement, not a number supplied by an unsolicited caller. Tell the representative that the ARM reset created an affordability problem and ask to speak with a mortgage-assistance or loss-mitigation specialist.
Be ready to describe:
- Why your payment became unaffordable.
- Whether the problem is temporary, such as a short-term income interruption, or ongoing.
- Your household income, essential expenses, assets, and other debts.
- The monthly amount you can realistically sustain, rather than an amount that works for only one month.
Ask the specialist to identify every option you may be eligible for, the documents required, the deadline for submitting them, and how to confirm that an application is complete. Ask how the servicer will treat any payment that is less than the full amount. A partial payment may be returned, credited, or placed in a suspense account; do not assume it will stop delinquency or protect you from collection activity.
Ask whether the loan is backed by the Federal Housing Administration, the U.S. Department of Agriculture, the Department of Veterans Affairs, Fannie Mae, or Freddie Mac. Programs and review rules can depend on the loan’s backing. If you do not know who owns or services the loan, check the statement and ask the servicer directly.
Submit a complete loss-mitigation application
Servicers commonly require an application, income records, bank statements, a list of expenses and debts, tax information, and a written explanation of the hardship. Requirements differ, so follow the servicer’s checklist rather than sending an incomplete packet based on a generic form.
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- Gather records. Collect pay stubs or benefit statements, recent bank statements, tax returns if requested, proof of insurance, monthly bills, and documents explaining the hardship.
- Complete every field. Missing signatures, unexplained deposits, or inconsistent figures can cause the servicer to return the packet as incomplete.
- Send it through the approved channel. Use the upload portal, email address, fax number, or mailing address provided by the servicer. Keep confirmation of delivery.
- Track the review. Maintain a dated log of calls, names, reference numbers, letters, documents sent, and deadlines.
- Confirm completeness. Ask the servicer to state whether the application is complete and what, if anything, remains outstanding.
A complete application submitted early enough can trigger procedural protections while it is being evaluated or while you comply with an offered modification. Those protections are conditional. Confirm your status with the servicer and continue responding to every request.
Options the servicer may review
There is no universal solution. The servicer reviews your loan, finances, hardship, and applicable investor rules, then tells you which options are available. Compare both the payment you can sustain now and the total amount you will owe over time.
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A modification permanently changes one or more loan terms. It may lower the interest rate, extend the repayment term, or forbear or reduce some principal. A lower monthly payment can come with a longer payoff period or a larger total amount paid. Before accepting, request the new rate, payment, maturity date, principal balance, fees, and a comparison of total payments under the old and proposed terms.
Repayment plan
A repayment plan spreads past-due amounts over a defined period and adds an extra amount to your regular payment. It can help when the hardship was temporary and your income has recovered. It may not solve a permanently unaffordable payment after an ARM reset. Ask for the exact payment, the number of months, the treatment of fees and interest, and what happens if you cannot maintain the added amount.
Forbearance
Forbearance temporarily pauses or reduces payments. It does not automatically erase what you owe. Before agreeing, ask whether interest or fees accrue, how missed amounts will be handled at the end, whether repayment will require a lump sum, and whether a modification or repayment plan will be considered afterward. Obtain the arrangement in writing.
Refinance
Refinancing could replace the ARM with a fixed-rate or different adjustable-rate loan, but you must qualify and the new loan must make economic sense. Approval depends on income, credit, debt-to-income ratio, home value, closing costs, current rates, and available loan programs. The ARM handbook cautions borrowers not to rely on being able to refinance before a rate or payment increase. Treat a refinance as a possibility to investigate, not a guaranteed exit.
Short sale
In a short sale, the home is sold for less than the mortgage balance with the servicer’s approval. Ask in writing whether the sale will fully release you from the remaining debt. Also ask about credit reporting, tax consequences, required marketing period, moving assistance, and the approval process. State law and the loan documents can affect whether a deficiency remains.
Deed-in-lieu of foreclosure
A deed-in-lieu transfers the property to the lender or owner instead of completing a foreclosure. It may be considered when keeping the home is not feasible. Confirm whether the transfer satisfies the entire debt, how junior liens will be handled, the move-out date, relocation assistance, credit reporting, and tax consequences. Obtain legal advice before signing a deed or release.
Compare relief offers by payment, cost, and consequences
| Option | Immediate payment effect | How past-due amounts are handled | Issues to verify |
|---|---|---|---|
| Modification | Usually lowers or restructures the payment permanently | May be added to principal, deferred, reduced, or otherwise incorporated into new terms | New rate, term, balance, fees, total payments, and eligibility |
| Repayment plan | Regular payment plus an additional amount for a set period | Spread over future payments | Exact added amount, duration, and whether the reset payment remains affordable |
| Forbearance | Temporarily pauses or reduces payments | Handled later under an agreed exit plan | Accruing interest or fees, lump-sum risk, and post-forbearance option |
| Refinance | Replaces the existing loan with new terms | Usually paid through the new loan or closing proceeds | Qualification, rate type, closing costs, home value, and total cost |
| Short sale | Ends the mortgage through an approved sale | May or may not be forgiven | Deficiency release, taxes, credit reporting, approval, and move-out terms |
| Deed-in-lieu | Ends ownership without a completed foreclosure | May or may not be fully released | Written debt release, liens, taxes, credit reporting, and relocation terms |
For every proposal, calculate whether the payment fits your ordinary budget after housing, utilities, food, transportation, insurance, taxes, and other essential costs. Then compare the total amount owed, the loan duration, fees, treatment of missed payments, effect on credit, and the risk of remaining debt.
Use free, independent housing counseling
A HUD-approved housing counselor can review your budget and loan documents, explain a servicer’s offer, help prepare paperwork, and communicate during the loss-mitigation process. The CFPB describes foreclosure-prevention counseling through HUD-approved agencies as free. A counselor cannot guarantee that you will keep the home or that a particular option will be approved.
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Find a counselor through the CFPB’s housing-counselor finder or call the HOPE Hotline at (888) 995-HOPE (4673). Ask what documents to bring and whether the agency serves your state. Independent counseling is especially useful when a proposed modification lowers the payment but substantially increases the total cost.
Understand the 120-day foreclosure rule
For covered mortgages, a servicer generally cannot make the first foreclosure notice or filing until you are more than 120 days delinquent. This is a federal procedural rule, not a guaranteed four-month grace period. The timeline after the first notice varies by state, loan type, court process, and other circumstances. Fees, credit damage, collection activity, and loss-mitigation deadlines can arise before the home is sold.
Do not wait for the 120 days to expire. Contact the servicer as soon as you know the reset payment will not work, submit a complete application, and ask which state-specific deadlines apply. If you have been served with court papers, consult an attorney or legal-aid organization promptly; a counselor cannot provide legal representation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Recognize foreclosure-rescue scams
People facing an ARM payment shock are common targets for companies promising a quick “government” solution. Stop and verify before sharing documents, money, or title.
- Demanding an upfront fee before providing a service.
- Guaranteeing a modification, a specific payment, or that you will keep the home.
- Instructing you to stop paying the servicer or to send payments to the company instead.
- Asking you to sign over the deed or transfer title while you remain responsible for the mortgage.
- Pressuring you to sign documents you do not understand or discouraging contact with the servicer, counselor, or attorney.
Work through the servicer, a HUD-approved counselor, and qualified legal or tax professionals. No legitimate helper can bypass the servicer’s underwriting or promise an outcome before your application is reviewed.
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A practical decision path
If your income should recover soon
Ask about a short-term forbearance or repayment plan, and insist on a written exit plan. Verify that the eventual payment, including any catch-up amount, fits your budget.
If the reset payment is permanently unaffordable
Prioritize a modification review and independent counseling. Compare a sustainable payment with the new total balance and payoff date. Investigate refinancing only if you can qualify and the full cost is favorable.
If keeping the home is no longer realistic
Ask the servicer about a short sale or deed-in-lieu before foreclosure advances. Obtain written terms on any remaining debt, taxes, credit reporting, liens, and moving arrangements, and seek legal advice before signing.
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Read every deadline, preserve the envelope and documents, contact the servicer’s legal or loss-mitigation department, and seek state-specific legal help immediately. Missing a court deadline can remove options that were available earlier.
Quick Recap
Questions to ask on your next call
- What is the exact reason my payment changed, and what portion is principal, interest, escrow, or fees?
- Which loss-mitigation options apply to my loan and investor?
- What is the complete application checklist and submission deadline?
- How will you treat a partial payment while my application is under review?
- When will you confirm that my application is complete?
- What payment, balance, term, and total cost would each option produce?
- What happens if I reject an offer or cannot meet a trial-payment requirement?
- What foreclosure deadlines apply in my state and to my loan?
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