Legal Steps to Prevent Foreclosure

April 3, 2008— -- Shelia Cruz thought she had found a small piece of the American dream, her own home in Staten Island, N.Y. But what she got was a terrifying headache that would take almost three years to quell.

It started in 2004, as she readied to plunk down $30,000 of hard-earned savings for a down payment on a new home. Much to her surprise, a mortgage broker told her she could keep her money and borrow the entire purchase price of a $400,000 townhouse.

That seemed like a lot of money for a single mother making about $50,000 a year, but Cruz was prepared to believe. She trusted the broker, a friend of a friend, who told her that her payments would be $2,000 a month and over time would likely go down.

So she signed the mortgage papers and moved in.

It was about six months later that she began to have her doubts. She read the documents carefully. They called for a sizeable boost in the interest rate after five years. They revealed that she was paying only interest and none of the principal that would eventually give her ownership of her home. And at the end of 30 years, she would have to come up with an additional $50,000.

Nobody had explained any of this to Cruz, and she suddenly realized that she was in trouble. It was tough enough to meet the monthly payments of $2,000. If they went up at all, she could go into default.

"I realized, 'I'm going to lose the house,'" she said.

Like untold thousands of American homeowners in recent years, Cruz was a victim of predatory lending: The practice of luring borrowers into mortgages that they cannot afford or even hope to understand. Many such victims never recover, losing their homes to lenders in foreclosure proceedings. But others turn their misfortune around, getting out from under bad loans to save their house and home.

How do they do it?

Legal experts say there are a number of ways to keep a lender at bay. In an interview with ABC News, Jessica Attie, a lawyer with South Brooklyn Legal Services who counsels homeowners threatened with foreclosure, offered a few pieces of advice for people faced with foreclosure.