what is a workout agreement 
a workout agreement is a contract mutually agreed to between a lender and borrower to renegotiate the terms on a loan that is in default often in the case of a mortgage that is in arrears generally the workout includes waiving any existing defaults and restructuring the loan s terms and covenants a workout agreement is only possible if it serves the interests of both the borrower and the lender understanding workout agreementsa mortgage workout agreement is intended to help a borrower avoid foreclosure the process by which the lender assumes control of a property from the homeowner due to a lack of payment as stipulated in the mortgage agreement at the same time it helps the lender recoup some of their funds that would otherwise be lost in the process the renegotiated terms will generally provide some measure of relief to the borrower by reducing the debt servicing burden through accommodative measures provided by the lender examples of relief can include extending the term of the loan or rescheduling payments while the benefits to the borrower of a workout agreement are obvious the advantage to the lender is that it avoids the expense and trouble of payment recovery efforts such as foreclosure for workouts in real estate or a collection lawsuit other types of workout agreements can involve different kinds of loans and even involve liquidation scenarios a business that becomes insolvent and cannot meet its debt obligations may seek an arrangement to appease creditors and shareholders special considerations with workout agreementsfor borrowers general best practices to consider when negotiating or thinking about negotiating a workout agreement with a lender include the following mortgage lending discrimination is illegal if you think you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps you can take one such step is to file a report to the consumer financial protection bureau or with the u s department of housing and urban development hud 2