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. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
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 do mortgage lenders use the securitization food chain?

    The phrase "securitization food chain" was made popular by director Chris Ferguson in "Inside Job," a film about the 2007-2 ... Read Full Answer >>
  3. Do mortgage escrow accounts earn interest?

    A bank is not required to pay interest on any escrow accounts (also mortgage impound accounts) it holds for its customers. ... Read Full Answer >>
  4. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  5. How often is interest compounded?

    Interest can be compounded on any given frequency schedule. Common interest compounding time frames are daily, monthly, semi-annually ... Read Full Answer >>
  6. How does the loan-to-value ratio affect my mortgage payments?

    Several factors affect the mortgage rate you can obtain when you purchase a home. Lenders analyze credit histories and scores ... 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

    Is it Worth Saving Up for a Bigger Down Payment?

    There are numerous low-down-payment mortgage options out there, but sometimes it makes sense to build up your savings so you can borrow less.
  7. Credit & Loans

    Is A 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.
  8. Credit & Loans

    What Are The Pros and Cons Of A 15-Year Mortgage?

    The shorter term, and higher monthly payment, are only part of the picture.
  9. Credit & Loans

    Which Is Better: A 30-Year Or 15-Year Mortgage?

    The difference in monthly payments is what homebuyers think of first when they compare the two. But have you considered these other points?
  10. Credit & Loans

    Is It Worth Buying A Second Home To Rent?

    Mortgage interest rates are low, but consider these dos and don'ts before making the leap into rental property ownership.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center