As a rule, if your mortgage payment is at least two months late, your bank is probably already contemplating foreclosure. This is the only legal means that your lender has to be able to repossess your home, making you move out and usually selling it to regenerate the money. A foreclosure is usually considered a drastic step, but sometimes becomes unavoidable, unless you are able to take immediate action. A foreclosure in your history or a deficiency judgment will end up seriously affecting your credit rating.

If you are lagging behind on your payments or if you are already in foreclosure, you need to know about the rights and the options that are available to you. First of all, be absolutely sure to respond to the letters. If you cannot make the payments, contact the lender and speak to a representative. Try to explain your situation. Provide financial information such as your monthly income. You may qualify for some kind of assistance or there may even be another loan that is better suited. Be sure to stay in the premises in the meantime, as you may not qualify for any assistance if you seem to abandon the property. You can even delay foreclosure, if you are already in the process of filing for bankruptcy or are actually actively seeking to sell.

Also, if you by any chance, have the ability to pay more than your original mortgage amount obligation, it may be possible to negotiate a plan with your lender. This would keep you in your home and even get you back on track. This may happen if the financial setback that caused the default was temporary.

Your Options:

Special forbearance: Your lender may be able to arrange a different repayment plan, based on your financial situation and temporarily reduce or even suspend payments. You must, of course, be able to provide information to show that you will be able to deal with the new payment plan.

Mortgage modification: The lender can refinance the debt or even extend the term of the loan. This would make the payments affordable. The lender might even agree to refinance. Rather than incurring the expenses of foreclosure, the bank may be willing to work out a payment plan.

Partial claim: The lender may be able to help you get an interest-free loan from HUD, to cover the amount owed. HUD would pay the amount directly to the lender and you are required to sign a promissory note. A lien would then be placed on the property until paid in full. This loan will only fall due, if you sell your property or at the time of maturity of your mortgage.

Pre-foreclosure sale: This allows you to sell the property and pay the bank, avoiding foreclosure and credit rating damage.

Deed-in-lieu of foreclosure: As a last resort, you can voluntarily return the property to the lender. This betters your chances of getting another loan, although you lose your house.

And finally, the most important thing to do is to contact an HUD-approved housing counseling agency. They will provide free information about the services and programs available to help you. They also offer credit counseling and can help you to decide which of the options suits you best.

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