Your first step is to call your lender. If you are having difficulty paying your mortgage on time, it's important to act now before things get so bad that you are facing foreclosure. Your biggest ally if you encounter difficulty paying your mortgage on time is often your lender. Don't wait – call them as soon as you know you are having problems.

Your lender – also known as a servicer – has a number of options to help you stay in or sell your home. These options include forebearance, repayment plans and loan modifications – as well as relief under the new Federal housing plan. You can find their contact information on your mortgage statement or coupon book.

When you call your lender, be sure to have your account information handy and be ready to give a summary of the financial problems you are having. You should also have recent income statements and your household budget with you.

Be prepared for more than one conversation. Your lender may require that you complete a "loan work-out" package – you may not be eligible for help without it, so complete it as soon as you receive it.

Questions to ask:

How much time is the lender willing to give you to complete a work-out?

What are your obligations under the work-out package?

What are the specifics? Be sure to ask what is due and when.

Will a foreclosure sale of your property be put on hold while your lender looks at the possibility of a work-out package?

Visit the Mortgage Bankers Association's Foreclosure Prevention Resource Center for advice on calling your lender for assistance.
 

Preparing for Your Conversation

Be ready to provide a short explanation of why you are unable to make your mortgage payment.  Did someone lose a job?  Is there a medical emergency? Are you current on your loan but have not been able to refinance into better terms?

You’ll also need to provide your servicer with important information about your property, income, and debt obligations. 

Being prepared for this conversation will help your servicer understand your case and see if you qualify for a loan modification or other mortgage workout.

If you need assistance and cannot reach your servicer, you can contact one of the local HUD approved counseling agencies in your area.

Facing a foreclosure is a scary thing, but there are things you should do – and shouldn't do – to avoid making the situation worse.

DO answer the phone and read your mail.
Avoiding your lender won't make the problem go away. In fact, it will only make the problem worse. Your lender may be able to help you, so be sure to answer the phone and read any mail they may have sent you.

DO realistically assess your situation.
Are your financial problems temporary? If you are temporarily out of work and will be fine once you find a new job, call your lender. Lenders may be able to offer a forbearance or repayment plan. 

DO consider your options.
If you are not in a position to keep your home, consider selling it before you face a foreclosure. If you have already missed a mortgage payment, call your lender. There may be purchase options, like a short payoff or assumption that help avoid foreclosure. 

DO be aware of certain financial responsibilities.
Even if your lender sells your property, you may still be responsible for the difference in the sale price and what you owe. It is also important to realize that you may be responsible for certain taxes when a lender forecloses on your property. However, the IRS does provide tax relief in certain situations.

DO protect your wealth.
Recognize that you may have significant equity in your property that must be preserved.

DON'T move out of your home.
In order to qualify for assistance, homeowners are often required to be living in their home. Be sure to talk to your lender before you think about moving. 

DON'T ignore the problem.
It may be possible to keep your home, but if you wait to take action, fewer options will be available. You have certain rights and can take certain actions to help you keep your home; however, you only have a limited amount of time to assert those rights or take those actions.
Talk to a lawyer or legal aid organization, since your rights vary from state to state. Most states and large cities have legal aid organizations; to find one near you, go to the Legal Services Corporation, a government-sponsored organization that provides high-quality civil legal assistance to low-income Americans.

DON'T convince yourself you can afford a home if you can't.
Most lenders will only lend what a borrower can afford, but some less scrupulous lenders will allow borrowers to get in over their heads. In some cases, a home that was affordable becomes unaffordable due to changes in your life circumstances. If your mortgage is truly beyond your means, consider selling your home and purchasing a less expensive home or renting for a period of time before the only option left is foreclosure. Call your mortgage company, they may be able to help you avoid foreclosure by agreeing to an assumption or a short payoff.

DON'T fall victim to a scheme.
Some people want to profit by your misfortune by offering to contact and conduct all work-outs and negotiations with your lender on your behalf – for a fee.