Facing Foreclosure? Take These Steps

With foreclosures on the rise in the U.S., an increasing number of homeowners are presented with one of the most grave financial predicaments they can face.

Foreclosures in July 2007 were up 93% from July 2006, according to RealtyTrac, fueled by the weak housing market and numerous subprime, adjustable-rate mortgages resetting to higher rates that homeowners can't afford.

The effects of the credit crisis that has seized U.S. financial markets in recent weeks are not the only culprits. Homeowners who lose their jobs or are saddled with unexpected medical bills face sharp losses in their incomes, rendering them unable to keep up with mortgage payments.

The consequences are dire. Aside from losing their homes, people who face foreclosure earn a black mark on their credit that can hinder their ability to buy -- or sometimes, even rent -- another home in the future. If you find yourself in a position where making your mortgage payment may not be possible for any reason, here are the basic steps you need to take right away:

1. Act Quickly

The most important thing is to act quickly. That means taking immediate action when you first see an issue arising and not waiting until you are already behind in your mortgage payments. The sooner you realize a problem is coming, the more options you will have to address the cash-flow inadequacy that is causing the trouble.

2. Talk to Your Lender

Your lender doesn't want you to default on your mortgage any more than you do. The earlier you can let your lender know that there may be a problem in making mortgage payments, the more time you will have to negotiate a solution.