Workout Agreement

AAA

DEFINITION of 'Workout Agreement'

A mutual agreement between a lender and borrower to renegotiate terms on a loan that is technically in default, so as to avoid foreclosure or liquidation. The renegotiated terms will generally provide some measure of relief to the borrower in terms of reducing the debt-servicing burden through accommodative measures provided by the lender, such as extending the term of the loan, rescheduling repayments and so on.

INVESTOPEDIA EXPLAINS 'Workout Agreement'

A workout agreement is only possible if it is in the interest of both the borrower and the lender to work things out. While the benefits to the borrower of a workout agreement are obvious, the advantage to the lender is that it avoids the expense and effort of recovery efforts such as foreclosure.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  3. Serious Delinquency

    When a single-family mortgage is 90 days (or more) past due and ...
  4. Deed In Lieu Of Foreclosure

    A potential option taken by a mortgagor (a borrower) to avoid ...
  5. Loan Modification

    A modification to an existing loan made by a lender in response ...
  6. Deficiency Balance

    The amount owed to a creditor if the sale proceeds from the collateral ...
RELATED FAQS
  1. What are the best ways to rebuild my credit score quickly?

    If your credit report carries a few blemishes, rebuilding your credit can seem overwhelming. Some credit blunders such as ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  5. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Short Sell Your Home To Avoid Foreclosure

    Are you in danger of losing your home? Protect your credit score with a real estate short sale.
  2. Home & Auto

    The Pitfalls Of Buying A Foreclosure House

    Find out if the house you're eyeing is really a good deal.
  3. Options & Futures

    Things To Know About The Home Modification Plan

    This program allows FHA borrowers to reduce monthly mortgage payments through negotiation with lenders.
  4. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  5. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  6. Credit & Loans

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  7. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  8. Home & Auto

    Strategies To Buy The Perfect Vacation Home

    Ask yourself these six questions to make the right decision about a vacation property.
  9. Economics

    How Does a Lien Work?

    A lien gives a creditor the legal right to seize and sell property, then use the proceeds to pay off a borrower’s debt.
  10. Retirement

    Is Your Mortgage Robbing Your Retirement?

    If you picked the mortgage with the lowest possible monthly payment, you may be blowing what could be your retirement money on mortgage interest.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!