Foreclosure could occur. Foreclosure is the legal process that your mortgage servicer can use to take or repossess your home. If this happens, you will be forced to move out of your house.

 What should I do if I fall behind in my mortgage payments?

Contact your mortgage servicer. Do not ignore the letters or calls from your mortgage servicer. Call or write your servicer’s loss mitigation department without delay. Explain your situation.

 Do I really need to provide financial information and forms?

Yes. Your mortgage servicer will require you to provide updated financial information, your income and expenses, before they consider any options. It is truly for your benefit.

 What happens if I just vacate the house?

In addition to losing your home, your future credit rating and ability to buy a future house will be damaged by the foreclosure. You may also owe a deficiency balance, which is the difference between the price your mortgage servicer receives when he sells your foreclosed home and the balance on your mortgage loan. Vacating your home without working with the servicer is the absolute worst thing you can do in this situation.

 What are the alternatives to foreclosure?

You have several alternatives for avoiding foreclosure, depending upon your financial situation. Mortgage servicers want you to stay in your home, because they often lose more money when they foreclose than when they consider alternatives. If you absolutely do not have the resources to stay within the home, working with your mortgage servicer through relocation options will usually result in a more favorable situation for your future purchase of a home.

Repayment plans also known as forbearance – If your financial situation permits, you may be able to negotiate a repayment plan from your lender, including temporary reduction or suspension of your mortgage payments.

Loan modifications – Your lender may allow you to extend your mortgage term or change the interest rate of your adjustable rate mortgage to a more manageable level.

Refinance – Your mortgage servicer may allow you to refinance your debt.

Partial claims – You may be able to secure a second mortgage to bring your mortgage current. Your second mortgage is typically interest free and requires no payments until you pay off the first mortgage or sell the property.

Pre-foreclosure sales or short sales – Your mortgage servicer may allow you to sell your home to pay off your mortgage even if your home's value is less than your loan balance. Your mortgage servicer may agree to the sale of your property for an amount less than the loan balance.

Deed in lieu of foreclosure – You may be able to give your home back to the lender in exchange for canceling the outstanding mortgage. You will lose your house, but this option may not be as damaging to your future financial situation as a foreclosure.

With any pre-foreclosure, short sale or deed in lieu agreement, homeowners may be required to pay the lender any outstanding balance (known as a deficiency judgment). Homeowners should make sure they understand all of the terms of their transactions.

 Who should I work with to help me resolve my situation?

Work directly with your mortgage servicer, or a government approved counseling agency. Some mortgage servicers who are having difficulty in reaching their homeowners engage some company's to contact and educate homeowners on foreclosure alternatives and assist with reconnecting the homeowners to the mortgage servicers. Within the Housing Stimulus/GSE Reform bill signed by President Bush and going into effect October 1, 2008, Congress allocated funding for foreclosure prevention counseling with HUD loans through GSE and HUD approved counseling agencies.

 Should I ever consider paying for help?

No. Be wary of phony counseling agencies offering assistance for a fee. Also, watch out for potential “buyers” who ask you to deed the property to them while they help you with your financial troubles. Signing over your deed to a third party does not necessarily relieve you of your loan obligation.

 What is the difference between a lender and a mortgage servicer?

Lenders are most often the organizations responsible for originating loans. Most, but not all, lenders sell the loans they originate to investors, who employ a mortgage servicer or loan administration organization to oversee the collection of mortgage payments and escrow administration.