Millions of Americans have lost their homes to foreclosure in the last few years. If you're having trouble paying your mortgage, learn about the steps you can take to avoid foreclosure or to minimize your debt after it happens. Quick action is the key to success -- it can save your home and/or help protect your credit rating.

Don't Walk Away: Consider Your Options

Don't give up and let the lender foreclose on your home without considering your options. A foreclosure will hurt your credit rating and make it difficult to buy another home anytime soon. In addition, if the profits from selling your home don't cover the unpaid portion of your loan, your lender might sue you for the rest.

Your best options if you're having trouble making mortgage payments include:

• working out a foreclosure alternative with your lender
• getting government help
• filing for bankruptcy
• selling your home yourself, or
• giving your home deed to the lender.

These options are described in more detail below.

Beware of scam artists. People facing foreclosure are often preyed upon by others claiming they'll help. Some homeowners have unwittingly signed documents giving these scammers title to their property, thus turning themselves into renters. Don't sign anything without getting a professional opinion first.

Working Out a Deal With Your Lender

As soon as you realize you'll have trouble paying your mortgage—ideally, before you've missed any payments—contact your lender or mortgage servicer (the company you send your monthly payments to). Lenders have an incentive to work out an alternative to foreclosure with home loan borrowers, if only to reduce the number of foreclosures they're dealing with.

Do it sooner rather than later. If you call soon, you may be able to work out a solution with your lender. It's easier to get caught up or work out another solution if you haven't fallen too far behind in payments.

Possible solutions. The lender may accept partial payments for a few months (though you may have to agree to make up the difference later), accept a late payment, or agree to redo the terms of your loan.

What to say when you contact your lender. Here's what you should ask for, in lender-language. (You'll probably need to get to the right department first—it may have a name like "loss mitigation.")

• Forbearance. You make a reduced payment, or no payment, for an agreed-upon period of time. Usually, the lender requires you to make up the difference at a later time. The lender is most likely to agree to this if you can demonstrate that you will soon receive a bonus, tax refund, or some other extra cash.
• Loan reinstatement. You agree to make up your missed (or reduced) payments by a specific date.
• Loan modification. Your lender agrees to alter the terms of the loan so that you can better afford the payments. For example, the lender may agree to add your missed payments to your loan balance, to stretch out your loan over a longer term (which will lower your payments but result in more interest over the life of the loan), or to convert an adjustable rate to a fixed rate mortgage.

Getting Government Help

Through the U.S. government's Making Home Affordable program, you may be able to refinance your loan.

The Home Affordable Refinance Program. The Home Affordable Refinance Program, or HARP, was created to help homeowners who are current on their mortgage payments but expect to have difficulty paying their mortgages in the near future, and whose loans are owned by Freddie Mac or Fannie Mae. Under HARP, distressed borrowers may be able to refinance their mortgages into a fixed-rate, low-interest loan. HARP is scheduled to end on September 30, 2017. For more information, see the website for HARP.

For more information on HARP, see our article on refinancing your mortgage under the Making Home Affordable program.

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