by Paul Lalley

Created on: June 22, 2008   Last Updated: December 30, 2009

With the mortgage meltdown, we're seeing more and more foreclosures on sub-prime mortgages, mortgages provided to individuals, and families that couldn't afford the traditional 30-year fixed mortgage. More than 1.75 million homes are at risk of foreclosure. If yours is one of them, there's lots you can do.

1. Don't panic. Foreclosure is simply a legal process. You aren't a criminal or a deadbeat. Homeowners fall behind on payments for any number of reasons job loss, medical emergencies, family separations. Falling behind on your mortgage does not make you a bad person.

Second, foreclosure is a process one that takes time so you don't have to start packing up the china right away. In fact, there are things you can do to go pro-active and actually keep your house.

2. Call the lender immediately. The sooner you get in touch the better. Talk to someone in the mortgage department and set up some face time to site down with a mortgage executive someone who can make a decision regarding your loan.

Meeting face-to-face shows you're aggressive about keeping your home that you're a good risk even if you're a month or two behind on payments.

Provide a complete explanation in person and in writing why you're late on those payments. Lenders don't want to take your house. Each repossession costs a bank about $50K so if there's any way the lender can keep you in that house it will.

3. Try to negotiate. A lender might be inclined to switch you over from your sub-prime ARM to a regular 30-year fixed rate if you can provide good reasons for being late and you can demonstrate an ability to pay on time in the future while you catch up on back payments. You have to be able to do both to have any negotiating leverage.

4. Try to refinance with another lender. This'll be tough as long as lenders are leery of taking on any more risk, which is exactly what they do when they give a homeowner a mortgage. However, if you have too much mortgage, pay some of it down with other assets if they're available. For example, let's say you have a Picasso etching worth $250,000. You may hate to part with the object d'arte but it's a lot better than uprooting your family and losing all of the equity in your home.

5. Research the debt investment market. There are individuals (called angels) and companies that purchase debt. Sometimes they buy accounts receivables for pennies on the dollar. Sometimes they buy back-tax-delinquent lists, paying the town $2 million for a list of homeowners who owe $4 million

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