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If you are losing your home to foreclosure, realize that thousands of others are in the same situation. As things look now, thousands more will lose their homes before the economy gets better.

The Mortgage Melt-Down

Subprime mortgage practices led to what is known today as the mortgage melt-down. The number of foreclosures increased sharply as interest rates were reset for those who refinanced their homes with adjustable rate mortgages (ARMs). The benefit of the ARM was that one could get 100% financing at a very low interest rate. Of course, this rate was only good for three years; most people understood this as they planned on selling their home in the next few years or simply refinancing with a fixed rate mortgage.

Unfortunately, the economy took a devastating downturn. With unemployment on the rise, many people lost their jobs and defaulted on their mortgage; therefore, they were unable to qualify to refinance their home. Now, they are stuck with a mortgage payment that they cannot afford. In addition, real estate market values declined sharply, making homes unable to appraise for anything near the amount owed on the mortgage; therefore, another roadblock to refinancing.

The Crisis Continues

The foreclosure crisis continues as people are forced to walk away from their homes. Lenders and investors are losing money and mortgage guidelines are tightened. People with perfect credit are having difficulty getting a new mortgage with an affordable fixed rate.

Unfortunate things happen to responsible people. Foreclosure is painful, no matter what the cause. People who face losing their homes to foreclosure feel helpless as they wonder who to turn to for help. Many are tired of the phone calls and letters from their mortgage companies demanding payment.

To add to the confusion, they receive letters from lawyers or other companies promising to save your home from foreclosure or stop foreclosure now. Some of these companies are somewhat reputable, but many are preying on your last dollar as they demand an up-front fee for a service that gives you false hope and ultimately does not provide a solution. Generally, a reputable company will not approach you, call you, or send letters to offer their services. This is the behavior of a predator that got your name from a foreclosure list that they subscribed to.

Foreclosure Solutions

Now that I have explained how we got into the foreclosure crisis, I will cover some of the options available to you. One is to just walk away. Though many people are doing this, it should be your last resort. A foreclosure is very damaging to your credit report and it is one of the items that take the longest time to be removed from your credit history. There are cases where this is your only option, but there are others to consider as well.

Some lenders are open to discussing a loan modification plan to make the mortgage more affordable. They may reduce your interest rate or amortize your payments over a longer term. Ive even heard of cases where the lender stopped the foreclosure process and reduced the balance owed, allowing the homeowner to start fresh with a brand new mortgage. This practice was not common years ago; however, things have changed drastically and lending practices have followed suit.

Another solution is to list your home and see what kind of offers you get. Chances are you will not be able to sell the home for what you owe on the mortgage because market values have declined sharply. In this case, you need to negotiate with your lender to convince him/her to accept a short sale. A short sale is a transaction where the lender is willing to accept less than what is owed now rather than foreclose on the home, incur legal expenses, wait out the redemption period, evict the homeowner, secure the home, list the home, etcAll of this takes time and effort; meanwhile, values continue to decline and the mortgage holder takes a greater loss.

Homeowners can negotiate with their lenders to reach a solution; however, many do not know how to go about it, or they are just too stressed out and emotionally drained to handle the task. It is important that you know what to say and how to present your case so your lender will be willing to cooperate. There are reputable companies who provide these services for a reasonable fee.