Every day I see more homeowners who are worried, terrified really, that their loan is going to cause them to lose their home. OF course, with the latest economic data out, there is no doubt that the risks and worries are there. Jobless numbers are rising. The economy is trying to recovery (retail sales are up, which is always a good sign.) Oil prices are causing everyone to cringe every time you step up to the pump. Yet, still, the largest concern I see is a bad mortgage. If you want to fix your mortgage, what would you do? More importantly, what could you do?

Foreclosure prevention is the term of the day. This method has been designed to help those who are struggling with making their mortgage payments before the home gets to foreclosure. These are troubled loans needing help. The problem is, many loans can be worked out, but many others cannot. Why do some lenders offer solutions while others do not? Let us try to explain here.

First, who are the game players in foreclosure prevention? The mortgage servicer is on one side of the coin. On the other are the borrowers. Then, there are foreclosure prevention counselors in between, serving as the go between. In other words, you do not work directly with your lender to fix your mortgage. Instead, you work with a third party. Unbelievably, your lender does want to fix your loan because it is much more profitable (as well as much less expensive) to have you in that loan even at a lower profit amount, than it is to foreclose on you. That is not to say they will take anything, because they simply will not.

So, why do some get help and others do not? It really comes down to the numbers.

The lender is looking at their numbers and their costs. For example, if you are going to cost the mortgage lender more to stay in your home (by fixing the loan) than foreclosure will cost the lender, then the homeowner is unlikely to get their loan fixed. When foreclosure is less expensive to the mortgage provider, they are likely to go that route. In addition, they do have the right to do so.

On the other hand, the foreclosure process is anything but inexpensive. According to Center for Responsible Lending, the foreclosure process will cost the lender about $50,000.

What Happens In Foreclosure Prevention?

So, how do you know if you will qualify? First things first, the bank wants to know, directly, what the problem is. They will likely request a detailed explanation of your income and expenses, down to the food you buy and the credit cards you have. You will likely need to provide paycheck stubs as proof of income and bank records, too. Often, it is in these expenses that negotiations happen.

For example, let us say you have a nice Lexus in the garage and are paying a hefty $500 a month on it. The lender may require that you get out of the loan before they will work with you on foreclosure prevention.

Then, the mortgage lender will begin to figure out just what you can afford in payments. Let’s say that you bring home $4000 a month and have $2200 in expenses and you put aside $200 a month in savings. The lender will then work with you to get your housing payment at $1600 or around that much.

Now, remember, as a homeowner your lender is not going to work with you directly on this. You will need to contact third party mortgage prevention specialists.

It is also likely that you can find some help available to you through FHA loan specialists who can help you get into a new loan altogether. Whatever you do, do not sit on a bad loan.