If you, or someone you know, is behind or going to get behind on the mortgage payments, there may be a way to keep your home and maintain your credit rating if you confron the problem early. The most common mistake people make when they get behind on their mortgage payments is to ignore the problem. I know that there are some people that don't even open the foreclosure warning they get from the lender.

Not all of the following methods will result in saving your credit and two will not save your home but will keep you out of foreclosure.

1. Forbearance - Ask your lender if you can reduce or suspend your montly payments for a short period of time. This option may be available if, for example, you are expecting funds that would help bring your loan current. Sometimes the delinquent amount can be added to the end of the loan. Most lenders will continue to report the loan delinquent until that amount is brought current.
2. Partial Claim - This is explained in my posting here. If you have private mortgage insurance (PMI), it might be an idea to check with the lender and find out if this is available through the PMI company also. I have not heard of this being the case, but there is no harm in checking.
3. Pre-foreclosure sale - Sell your home prior to foreclosure. An option would also be a short sale of the property. The resulting difference between sale price and loan amount could result in a negative report on your credit.
4. Deed-in-lieu of foreclosure - With this option, you are able to give the house back to the lender and avoid foreclosure. Certain requirements are necessary, including no subordinate liens against the property. This, for credit purposes, is treated the same as a foreclosure.
5. Mortgage Modification - with this option you could refinance (without actually refinancing) or extend the term of your loan to lower your payments. There are several different mortgage modification:

• Forbearance modification - similiar to #1 but on a more permanent basis. This is in the bank's best interest but shows the loan current with payments being made.
• Temporary modification - an example would be lower interest rate for 2 years to lower monthly payment.
• Soft modification - similiar to a 2/1 buydown where the interest rate is reduced and then raised in incremental amounts.
• Permanent modification - lowering the interest rate and/or balance which would lower the payment to a more managable amount.
• Litigious modification - actually taking the lender to court. This is a very rare process but could be used for leverage.

There is also the option of either the FHASecure and FHA Hope for Homeowners (H4H) as far as refinancing your loan is concerned. Both of them work with delinquent mortgage payments but we are still waiting for final information on the FHA H4H program for implementation.

There are a number of agencies that are availble to help with this problem. Please review this posting for more information from Fannie Mae about Operation Home Path or locally with NEDCO.

Realistically, no lender wants to foreclose on a property. They almost always lose money in the process. However, they also don't want delinquent loans on their books. First step, talk to your lender.