Facing Foreclosure? You May Have Other Options

According to the Federal Housing Finance Agency, foreclosures have increased an incredible 150% in the last two years. And with statistics showing that the majority of adjustable rate mortgages that were taken out during the height of the housing bubble will reach their next adjustment period in 2009, those foreclosure numbers may be increasing dramatically over the next year. Because of this, the FHFA has announced a new plan to try to halt the current foreclosure crisis by allowing the modification of loan payments for millions of borrowers.

The program will be implemented sometime in December, but not everybody facing foreclosure will be eligible. The be considered for the program, you must meet these requirements:

- A loan on your primary residence that was made before January 1, 2008

- Cooperate fully with loan servicers and provide all needed information

- At least 90 days behind on your payments

- Not have filed for bankruptcy

- You must prove a hardship that has affected your ability to pay, such as unemployment or medical bills

Obviously, this program is meant to help those most in need as soon as possible, but it won't be able to help everybody facing financial trouble. If you can't qualify, that doesn't mean you are out of options. Consider these before foreclosure:

- Before you do anything else, talk to a reputable credit counseling agency. Go to the Department of Housing and Urban Development website and look at their list of reputable, low-cost (or sometimes even free!) counselors. Also visit the website for the non-profit National Foundation for Credit Counseling. They can help you find someone in your area to help.

- Find out who currently owns your loan by asking your loan servicer. Then call them and talk to them. Many lenders will be willing to work out a deal that will help you get your bills paid. Be upfront and direct and ask them what options you have and what help they can provide. 

- If you haven't done so already, the answer may just be to tighten your belt. Cut back on luxuries and unnecessary expenses. Sell the car, borrow from relatives, get a second or third job, or consider renting out a room if your zoning laws allow it. The housing market will turn around and the value of your home will start going up again. Sometimes the best solution is to stick it out for a while until you're above water again.

- Think about a short sale, where you sell your home with the lender and in return they take less than the balance of your loan. Short sales are becoming more and more prevalent, but they can be a long and complicated process.

- If you and your lender can't come to an agreement and you can't possibly come up with the money for the mortgage, consider asking your lender about transferring your title in return for the cancellation of your debt. Known as "deed in lieu of foreclosure", this essentially means that you're giving your house to the lender voluntarily. The upside is that your credit won't take as much of a hit as it would if you went into foreclosure.

- If all else fails, the last resort is still open to you - bankruptcy. Remember that filing for bankruptcy will remain on your record for a decade and will kill your credit for years, but it will erase your debt and open up some other options. In some cases, you may actually be able to negotiate a payment plan that will allow you to keep your home. If you've tried every other avenue, this may be your last option but make sure you talk to a financial adviser before you proceed.

If you are finding yourself facing foreclosure, you are not alone. And most importantly, you are not out of options. There is help out there that you may be able to take advantage of. Talk to a professional, do your research, sit down and discuss things with your family and figure out whatever you need to do to get through this rough market.