Even though workout programs are becoming more common, many homeowners still avoid contacting their lenders when they can't make their mortgage payments.

Celebrities sometimes don huge sunglasses and floppy hats in an effort to be anonymous. But it never really works. In the same respect, you can't (and shouldn't) disappear from your lender's purview when you've fallen behind in your mortgage payments.

Running but not hiding

According to a recent study done by Freddie Mac and Roper Public Affairs and Media, too many homeowners are in the dark about how to handle an insurmountable mortgage problem. The numbers are discouraging for the industry-a full 57 percent of homeowners don't know that simply talking to the lender or mortgage servicer may open up some alternatives to foreclosure. These options are known as "workout programs," and they create a lot of gain with little pain.

These may involve a temporary suspension of payments, structural changes to make the debt more affordable, or the transfer of the property deed to the lender in lieu of foreclosure. But the borrowers who don't contact their lenders and won't return their lender's phone calls, won't be able to explore any of these options. If the lines of communication remain closed, the borrower ends up waiting for eviction and foreclosure. And the lender must incur the costs of following through on those events. In short, it's a lose/lose situation.

Taking the bull by the horns

Lenders and mortgage servicers are asking borrowers to contact them at the first signs of trouble. Mortgages can move into foreclosure when the payments are just 90 days past due. Once the borrower receives a foreclosure notice, options disappear.

Therefore, borrowers who see a big mortgage problem looming should take the following steps right away:

Contact the lender or mortgage servicer To explore realistic workout options, borrowers must be upfront and honest with their lender or servicer about the situation.

Contact a housing counselor Non-profit housing counselors are trained to help struggling homeowners create budgets and restructure debt. They can help homeowners identify other problem areas, as well, such as high credit card debt balances and regular overspending.

Contact a local housing agency Some local housing agencies may soon have programs that can assist overburdened homeowners.

Contact the HOPE National helpline at 888-995-HOPE Which offers counselors who are trained by the Home Ownership Preservation Foundation to create individualized solutions.

Freddie Mac and other industry players are continuing to spread the word about taking early action to address a mortgage problem. Awareness of workout solutions is increasing, but the numbers say that it's not nearly fast enough-there are still too many homeowners hiding away when problems arise. If you need help with a problem mortgage, open the lines of communication with your lender. Otherwise, foreclosure will catch up with you, as surely as the paparazzi will recognize Paris Hilton hiding behind those Versace sunglasses.

Published on March 12, 2008