Avoid Foreclosure at any Price

Foreclosures will adversely affect millions of people across the U.S. this year, with long-range personal and financial repercussions. If at all possible, avoid foreclosure-even if it requires drastic measures-in order to sidestep this homeowner catastrophe.

Perhaps the most important thing to recognize about foreclosure is that it happens fast. Just as flood waters rise faster than many flood victims can anticipate, leaving them precious little time to react and get to higher ground, the foreclosure process-as most people don't realize-can start and end within the blink of an eye. The trick to protecting yourself from foreclosure is to take prompt and determined action to halt it.

Holding onto your home

Lenders, who are currently losing money through a tremendous volume of late payments and delinquencies, will move swiftly to initiate foreclosure proceedings. As soon as you miss a payment, the legal gears start rolling toward repossession of your home. As the saying goes, "if you snooze, you lose," so you can't afford to procrastinate.

Because a missed payment incurs late fees and penalties, mailing in the amount of your regular monthly mortgage payment after the due date may not help fix things. In fact, it could actually make the situation worse, because while your check is in transit, your funds are in limbo and you're losing critical time. By the time many homeowners realize that their late payment was rejected because it didn't include the full balance due, they're already late on their next payment. Instead, as soon as you miss a payment, immediately call or visit your lender and ask them exactly how much you have to pay to rectify the situation.

Then come up with the cash by any legal means possible. Sell your car, borrow money from a friend, hock your jewelry, cash in stocks, or tap into your 401(k) and take a loss, if necessary-but raise the money to hold on to your home.

Working with the mortgage company

If you can't figure out how to get the money, talk to your mortgage company, explain your circumstances, and ask for flexibility. They may agree to temporarily suspend your payments or accept less than your full monthly payment until you get back on your feet. You might be able to negotiate a different interest rate, or add the balance you owe for late payments into the mortgage principal. Lenders lose money on foreclosures, and they often have creative ways to help borrowers avoid the process.

If you can't come up with the money or work out new terms, you may need to sell your home to pay off your mortgage. Or, as a last resort, your lender might be willing to take the property in exchange for forgiving your outstanding debt. You'll lose your home and any equity, but at least you'll avoid having a foreclosure on your credit history. Having a clean record makes it much easier to recover from any future financial crisis in a shorter period of time.