As any other new development, the rising number of foreclosures has fueled the creation of hundreds of companies offering help to homeowners with their home in the foreclosure process. Often called "loss mitigation", this service costs anywhere from a few hundred dollars to over a thousand. These loss mitigation "specialists" claim that they can help you keep your home by negotiating a workout plan that you can afford with your lender on your behalf.

Doesn't sound bad, right? Except that, everything they are doing for you, you can do by yourself! That is why these services are often called "phantom help". These companies are not doing anything but TALKING to your lender about working out a deal and you could very well TALK to your lender yourself. Keep in mind that your lender does not want to foreclose on your home, so they will be very motivated to talk to you about working out a plan that you can deal with, to get you out of the foreclosure process.

Rules to keep in mind when negotiating with your lender:

1. Keep the lines of communication open with your bank. At the very first sign that you might miss a payment, make sure to call your lender right away to let them know even if the payment is not due yet. Sometimes the lender may offer you options at that stage that would not be available to you once you miss a few payments completely. It is understandable that some homeowners may feel ashamed to talk to the lender about not being able to make a payment. But remember, this is a business matter, not a personal one.
2. Talk to the right person. Homeowners often wait until they miss a few payments before they call what they think is their lender. Actually, they are calling the collection agency that the lender contracted to collect on their debt. You should never talk to a collection agency as they cannot help you. You should call your lender directly and ask for the loss mitigation department.
3. Know what your options are. If you ever talk to a mortgage company about a possible workout plan, they will most certainly ask you for a financial statement. I know that sounds really fancy, but it is just your income, expenses and reserves you may have. Before you call the lender, write down all your monthly income, all your monthly expenses, and any savings you might have. It is important that you make a determination whether or not you can afford the home at all. Because if you cannot, a workout plan will not work and you will find yourself in the same position a little later. If you cannot afford the home, you should consider selling it and moving into smaller place. In order to make the home sell sooner you can talk to your lender about accepting a short sale ( a price less than your mortgage balance).
4. Most importantly, consider everything in advance. Once the foreclosure clock starts ticking, your options diminish as time passes. Start considering your options early and you can save your home, your credit or both.

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