Lenders have been tightening their lending standards for over 18 months now.  First we saw the subprime mortgage market melt down (subprime are those borrowers with less than perfect credit).  Then, as the number of foreclosures continued to rise, there was even more tightening and the squeeze extended beyond the subprime markets.  The bottom line is that fewer people qualify for mortgages in today's market.  The days when the banks would loan to anyone with a pulse are gone.

First, the good news

There are loans available for homeowners with not-so-good credit.   There are lenders that target foreclosure bail outs and willingly lend to high risk borrowers.  Many of these lenders will overlook unstable employment history, poor money management and just about anything else.    It almost sounds too good to be true.  So, let's take a closer look.

Chances are that if you are a homeowner behind in payments and possibly facing foreclosure that you have had a "life event" that put you behind the eight ball.  Whether it was a job loss, divorce, illness whatever it was; think about how that life event affected your viability as a borrower.    

Next, think about your credit report.   Frequently when money gets tight, payments to credit cards, furniture stores, even auto loans fall behind too.  Credit cards and most other loans report your payment habits to the credit bureaus.  Any account with an "over-30 days" late payment waves a red flag and has a serious effect on your credit score.   

So, why would these lenders continue to loan mortgage money to subprime borrowers?  Simple, it's all about your property - not you.  If you have enough equity in your home; you can get a loan.

Bridge Loans

There are loans available that can help you get your current loan back on track.  I call them "bridge loans" because they serve as a bridge from foreclosure to reinstatement.  These loans are most always private lenders and short term.  The good news is that when combined with a properly negotiated repayment plan - they can be the ticket to stop foreclosure. 

Now for the Rest of the Story:

Caveat Emptor - definition:  the principle that the buyer is responsible for making sure that goods bought are of a reasonable quality, unless the seller is offering a guarantee of their quality.  Also known as Buyer Beware.  In this case, refinance, the goods is a mortgage, and you, the homeowner is the buyer.  Again, Buyer Beware.

BEWARE of anyone who promises you a total refinance with a conventional lender.  Yes it happens but in today's market, it doesn't happen often unless you have a minimum of 35% equity.    BEWARE of private lenders (think loan shark) - yes, private money is a good tool but it is critical that the homeowners fully understands what he's getting in to.