When you miss a payment you will most likely receive a letter from your bank or lender informing you that you are delinquent (behind in house payments) 30 days, 60 days, 90 days, etc. These letters will only last so long, before the “clock” starts ticking. When I say “clock”, I mean the window of time your bank or lender HAS TO LEGALLY wait before they can evict you (the time frame depends on your state laws).

If you DO NOT RESPOND to the letter(s), the bank assumes you do not want to stay in your home or that you may have already moved out in the middle of the night, which unfortunately does happen because people haven’t been educated. If you don’t contact your lender, you may actually be speeding up the process of foreclosure on your home. The best thing to do is stay in contact with them, even if you are not able to make payments. Bear in mind, if a foreclosure takes place, you will have the amount of the outstanding loan and any additional fees left on your credit report as debt owed. Just because you leave the property or are forced out by an eviction doesn’t mean you no longer owe the lender the amount still outstanding. The only way to avoid carrying that debt is by filing for bankruptcy.

Bankruptcy can be a scary thought…I discuss the most common questions and concerns later. Although bankruptcy stays on your credit report for 10 years, a foreclosure stays on your report for 7 years. Either way you will have to rebuild your credit WHICH CAN BE DONE!! The difference between the two is that with foreclosure you are still responsible for paying back the lender. If foreclosure does occur, you still have time AFTER the sale of the home in which to stay in your home and try to reclaim it (the amount of time varies by state, see your state laws for clarification – www.foreclosurelaw.org).

FORECLOSURE TIMELINE What happens when I miss my mortgage (house) payments? Foreclosure may occur, but not right away. This is the process banks and lenders use to repossess (take over) your home. After the foreclosure process is complete, only then will you have to move out of your house but you will still have some time. What to do if you receive a foreclosure, default, deficiency, late, overdue payment or notice of default letter?

1) DO NOT ignore the delinquent or “notice of default” (also known as the foreclosure process) letters from the bank.

2) STAY IN YOUR HOME. If you leave your home you may not qualify for mortgage payment or home modification assistance.

3) You may want to contact a HUD-approved housing counseling agency.

4) If you bought your home with a VA loan, call your nearest VA office or loan service representative for mortgage assistance.

Learn firsthand how to avoid foreclosure and save your home from foreclosure like I did!

You can also learn more about How To Stop Foreclosure in theforeclosure video.

Loss mitigation, also known as the loss mitigation department, is usually defined as a third party working on behalf of a lender to help homeowners that are facing foreclosure. It is a division within a bank that mitigates (synonyms – relieves, alleviates makes something less severe) the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner’s lender.

Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure. These new terms are typically obtained through loan modification, short sale negotiation, short refinance negotiation, deed in lieu of foreclosure, cash-for-keys negotiation, or a partial claim loan or other loan work-out. All of the options serve the same purpose, to stabilize the risk of loss the lender (investor) is in danger of realizing. Immediate foreclosure can cause higher losses for banks and lenders. A loss mitigation team or department can help ease the potential risk incurred by a lender by working out terms or loans that may be more manageable for a homeowner thereby limiting the amount of loss by either party.

It has been my experience that the loss mitigation department has a lot of red tape and is not an easily accessible group of people to speak with; in fact if you contact your lender and ask to speak to the loss mitigation department and are not already delinquent on a loan you will be passed around or deferred to someone else with in the bank.

If you feel that your home may be in jeopardy of foreclosure due to a job loss or some other financial crisis and want to go straight to the loss mitigation department to try and negotiate new terms, your chances are very slim that you will get through. Loss mitigation specialists do not negotiate on “potential” losses. By this I mean, if you sense that your debt or bills are spinning out of control and you would like to negotiate new terms with your lender BEFORE you default, trying to contact the loss mitigation department may be a futile effort. They only deal in “current risk”; homeowners that are already behind or delinquent in their loan payments. With foreclosures rates on the rise, the reality is that they barely have enough time to work through terms for homeowner’s whose homes are set to go to auction, also known as a sheriff’s sale or trustee sale depending on what state you live in.

If you as a homeowner end up behind in mortgage payments and receive a default letter or notice of delinquency from your lender chances are the signature at the bottom as well as the contact information for further assistance will be from the loss mitigation department.

Should you find yourself talking to a loss mitigation specialist like I did, you’ll need to be prepared if your intent is to try to workout a repayment option or loan modification. Everything you say during this conversation will be documented in your file. Now is not the time to contact your lender without some idea of your financial status. Being prepared will not only give your a better result when speaking with a specialist but will help speed the negotiations and give you a much better chance of success.

If the lender is willing to work out an arrangement with you, most likely you will be asked to send in all your current financial information, documentation as proof/cause for the recent delinquency and a financial hardship letter.

It is extremely important that you have some idea of what to pull together if you want a chance to save your home from foreclosure. Pulling together random bills as a snapshot of your debt WILL NOT be enough in most cases to get you the relief you seek nor save your home from foreclosure. You must be well prepared if you want to be considered for a workout option.

Believe me I know…I was turned down twice for assistance. The first time I was told I made too much money to be considered. The second time I was told I didn’t have enough income to cover the payments even if I did receive a workout plan. Meanwhile the clock was still ticking on my impending sheriff’s sale until I finally figured out what to do to stop the foreclosure and get a remodification that saved my home. Should you find yourself in a similar situation or facing foreclosure, I’ve made a video that takes you through my personal foreclosure story and explains in detail after weeks and months of research how I over came foreclosure and saved my home by working with my lender’s loss mitigation department.

You can also learn more about How To Stop Foreclosure like I did in my 20 minute personal foreclosure story video.. Free reprint available from: Don’t Get Caught Unprepared When Talking with Your Lender’s Loss Mitigation Department.

The fall out from home prices and foreclosures has had a ripple effect that has hit almost every industry. Home owners are losing their equity at a rate of almost ten percent per year over the past two years. Some large companies that do not directly offer mortgage loans such as AIG, AMBAC and Lehman Brothers are good examples of companies struggling to return to profitability. Many investors are left to wonder how companies that were not lending money directly to consumers could be impacted to such a large degree from the fall out in the housing and credit markets.

The insurance industry has also been under pressure from the declining real estate market. AIG, which is one of the worlds largest insurance companies. They also have one of the largest pools of capital to invest in the market. Their business model is one that they have billions of dollars in insurance premiums every year that they manage and invest prior to paying out on potential claims. The companies profitability has been tied into investing this money within the market and have a higher margin than their required pay outs. In short, one of the largest areas that they have invested money into is mortgage backed securities. They essentially become the last line in the financing of mortgages. Consumers typically obtain financing from a lender, who then sells the mortgage bond (security) as a pool to large investors such as AIG and retain the servicing rights (collecting the payment).

Lehman brothers is in the same situation as AIG, they have purchased billions of dollars of mortgage backed securities that have performed much worse than anticipated. In the past six months the company has lost over six billion dollars and has been forced to raise new operating capital to the tune of twelve billion dollars. As one of the largest investment banks in the world, they are struggling to return to a course of profitability and will continue to struggle until the mortgage industry can turn the corner.

The strategy of taking out an adjustable loan was sound except that their value dropped so significantly that they owe the same or even more than what their home is worth. These borrowers have been forced to keep their adjustable loan past the desired point of their strategy because they no longer have any equity in their home and most lenders will not lend to someone whose loan amount equals 95%-100% of their home’s value. Consequently, these borrowers are caught with a loan that carries a much higher monthly payment simply because of the nation’s home value meltdown.

If these borrowers were able to stay in their homes by freezing their rates where they are, if these borrowers could forgo the adjusted rate for awhile, most of them would be able to successfully refinance their properties as soon as market values started to turn around. If Congress took steps to work with this borrower many who might end up losing their homes could be saved from foreclosure.

Learn more about Obama Mortgage Relief Plan Qualifications.