Are you having trouble making ends meet? Not paying your bills on time? Are you not able to keep up with your mortgage payments and continue to get further and further behind? How do you get yourself out of this mess and not lose your home?

Avoiding foreclosure may be possible and you should work hard to avoid it.

What is foreclosure?

Foreclosure is the legal means by which a bank or other secured creditor sells or repossesses your home or a piece of real property due to your default on its promissory note. When your house is foreclosed on, you must move out and it is usually sold at public auction. When the foreclosure process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."

In the United States, there are two sorts of foreclosure in most common law states. Under "strict foreclosure," the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure, the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the property. In this type of foreclosure, a deed is issued to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward they get title to the property in return.

Some states have adopted non-judicial foreclosure proceedings, in which the mortgagee, gives the homeowner a legally specified notice of the default and the mortgagee's intent to sell the property. If the homeowner fails to cure its default, or use other lawful means, such as filing for bankruptcy to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the auction described above. The highest bidder at the auction becomes the owner of the property free and clear of any interest of the former homeowner.

What Should You Do To Avoid Foreclosure?

* Do not ignore letters from your lender. If you are having problems making your payments, call or write to your lender's Loss Mitigation Department without delay. Explain your situation. This shows good faith on your part. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.

* Stay in your home for now. You may not qualify for assistance if you abandon your property.

* Contact a HUD-approved housing counseling agency. Call (800) 569-4287 for the housing counseling agency nearest you. These agencies are valuable resources and they frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge, and they can help explain possible alternatives.

Some of the possible alternatives you may consider include the following:

Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current.

Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.

Keep in mind that your lender does not want to force foreclosure proceedings because it costs them a lot of money to do so. Therefore, if you are sincere and show good faith, they are more likely to work with you to find a solution. Foreclosure can seriously affect your ability to qualify for credit in the future. So get the help you need and avoid it if at all possible!
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