As many as 2.5 million families will lose their homes in 2007 due to foreclosure. The White House and congress are working toward legislation that would enable homeowners facing foreclosure to refinance their mortgages. However, if you think you may be in danger of losing your home, should you wait for relief to crawl through the legislative process, or take action yourself?

You know the answer.

Communication is key

Your lender does not want to foreclose on your home. Lenders are in the business of selling mortgages, not homes. Foreclosures are a headache for lenders.

But your lender doesn't have a crystal ball. You know if you're in trouble or not, so it's up to you to take the first step. If you know your payments are going to be late, call your lender to alert him. If you receive letters or phone calls from your lender, respond immediately. Cooperation is a two-way street.

If your financial problems are short-term:

If you're having short-term money problems, there are ways to work with your lender to avoid foreclosure. One is mortgage reinstatement. With reinstatement, if you're behind on your payments but can come up with a lump sum to pay off your past-due payments and penalties, your lender will reinstate your loan. Where would you find the money for a lump-sum payment? Perhaps you can sell a car or other asset, get money from a friend or relative, or cash in some of your retirement savings. If you really think about where you might get money to pay your delinquent payments; you might be surprised at your options.

You can also ask your lender for forbearance. Forbearance means that you will be allowed to delay your payments for a short time until another option can be found that will bring your mortgage payments up to date.

Yet another option is making additional payments on future monthly mortgage payments. If you are now able to make your monthly payments, but still have payments that are delinquent, your lender may allow you to pay additional amounts on your monthly payment until your account is current.

If your financial problems are long-term:

If you don't think your financial situation will improve, there are still options available.

If you still have an income, your lender may work with you to modify your existing mortgage. If you're able to make your existing monthly payments, but cannot pay the delinquent amounts, your lender may allow you to add the delinquent amounts to your existing mortgage balance and extend the term of your mortgage.

If you can't afford your monthly mortgage payment, your lender may agree to change the term of your mortgage so that the monthly payments will be lower. This may add a year or more to the term of your mortgage, but it will allow you to save your home.

If the options above won't work, you still have the option of selling your home. You can ask your lender to wait on foreclosure for a specified period of time to allow you to sell your home. While this isn't a pleasant option, you'll at least come out of the situation with less damage to your credit record. Also, depending upon how far behind you are in your payments and how much principal you have in the home, you may come out of the home sale with good chunk of cash for yourself, money that you can use to start over.

If your mortgage is an FHA-backed loan, you may be able to receive a one-time payment from the FHA's insurance fund. In order to receive such a payment, your payments must be between four and twelve months past due. You must also be able to show proof that you'll be able to resume making full monthly payments on your mortgage.

The FHA loan insurance solution will require that you allow the Department of Housing and Urban Development (HUD) to place a lien on your home for the amount you receive from the insurance fund. There's no interest on this insurance fund loan, but it must be repaid when you pay off your mortgage or sell your home. If you think this is a viable option, mention the FHA loan insurance solution to your lender.

If you have a Veterans Administration loan, the the VA offers counseling on ways to avoid foreclosure. Call 1-800-827-1000 to find the loan counselor nearest you.

You can hope and pray that Democrats and Republicans in Washington will agree on a solution to your problem, or you can tackle your problem now before you lose your home. The choice is yours.

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