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How to Avoid Foreclosure

With millions of Americans facing foreclosures, a number of people are looking for help to avoid losing their homes. What many may not realize is that lenders are often willing to try to work out an alternative — since it costs them money too.

So if you think you’re at risk of losing your home — or already in foreclosure — here are some things you can do to try to save it.

One of the first things you can do to avoid losing your home is to call your lenders as soon as you’re having trouble making full payments on time. Unfortunately, many people are afraid of letting their mortgage company know they’re in trouble and wait until they're so far behind they’re facing foreclosure.

For many homeowners, the biggest problem may be finding out who to call. Most mortgages these days are sold shortly after they are written; the company you make payments to may be just “servicing” the loan. That company is a good place to start, but it may take some time to find out who owns your loan.

Once you’ve found the company holding your mortgage, ask to speak with someone who has the authority to work out payment alternatives. You may have to move up the food chain past the person on the front line answering the customer service number.

When you explain your situation, ask for help. Possible solutions include “forbearance” — in which you get some breathing room to get past a temporary shortfall or unexpected expense. Lenders may also work with you to modify the original terms of your loan to make the payments more manageable.

If you’re having trouble with a loan terms that weren’t fully disclosed to you then you may have been a victim of predatory lending. In that case, call the consumer affairs department of your state’s Attorney General office and ask if they have a mortgage unit.

If the ads and marketing materials for your mortgage didn’t fully disclose the risks involved, the broker or lender may be guilty of deceptive advertising. If you think you've been duped, contact the consumer affairs bureau of the Federal Trade Commission at 1-877-FTC-HELP (382-4357). The FTC just announced it is cracking down on deceptive mortgage ads. (If you have a copy of the original ad or any marketing materials, that would help.)

You may also qualify for help under other special circumstances. Active-duty military personnel, for example, may be eligible for mortgage payment relief and protection from foreclosure under the Servicemembers Civil Relief Act of 2003. If your loan has an unusually high interest rate or charged high fees, you may also be covered by the Home Ownership and Equity Protection Act of 1994.

Since keeping track of all this is a full-time job, your best bet may be to get help from a professional credit counselor. Unfortunately, there are a lot of bad actors out there who claim they can help you keep your home — and end up snaring you in a scam that lands you deeper in debt. Many of these fraudsters are trolling the Internet and spamming for prospects. Avoid anyone who cold-calls you offering to help.

Instead, get a referral to an accredited debt counselor in your area. You can get a referral to a counseling agency approved by the Department of Housing and Urban Development on their Web site, or by calling 800 569-4287. You can also check with the National Federation of Credit Counselors which has its own program to certify counselors.

You may have to pay a fee for some of these services, but these agencies will work with you and your lenders to try to find a solution. They may also be able to help you work out other debts like credit card balances you can no longer manage.

The solution won’t be easy: You may have bought more house than you can afford, and wind up selling it to get a fresh start. But you’re better off maintaining control of your personal finances than waiting for your home to be taken from you.

And, if it’s any consolation, you’re not alone. Credit counseling agencies are swamped these days trying to help people in your situation.