How to Avoid Foreclosure and Save Your Home

ByABC News via logo
March 29, 2007, 10:59 AM

March 30, 2007 — -- It has been all over the news -- foreclosures are on the rise. According to the Mortgage Bankers Association, more than 2.1 million Americans missed at least one mortgage payment in 2006. This year, experts predict an increase in mortgage foreclosures to the tune of 33 percent more than in 2006 (based on a report by RealtyTrac). While there is no silver bullet, there are some things you can do to avoid foreclosure and to save your home.

Foreclosure is the legal process by which your mortgage lender can repossess your home. Essentially, if you stop making mortgage payments, the bank can initiate a process to take back your home which usually involves the forced sale of the property at a public auction, with the proceeds of the sale being applied to the outstanding mortgage debt.

Typically, the entire process takes about one year to complete -- from the initial determination by the lender to the sale of your home.

When your house is foreclosed upon, you not only lose your home but you leave lasting scars on your credit report. In fact, a foreclosure can stay on your credit report for between seven to 10 years, making it very difficult, if not impossible, to buy a new home, shop for a car or borrow any money.

While your instinct may be to avoid opening the mail and letting your phone calls go to voice mail, the absolute last thing you want to do is put your head in the sand and ignore the warning signs. Instead, you should contact your lender as soon as you realize that you are not going to be able to make a payment, as most lenders prefer to help borrowers get back on track rather than having to go through the process of foreclosure. It typically costs a lender more than $40,000 to foreclose on a home, so for a lender, it, too, is their last resort.

There are different strategies available, depending on whether you are trying to save your home or merely rid yourself of the mortgage obligation without having to foreclose. If you think you can get back on track with your mortgage payments, you should consider: