Foreclosures are escalating in the United States, with millions of people being forced out of their homes and into bankruptcy. Florida tops the housing crisis with more than 20,000 foreclosure filings in 2007, while California and Texas are close behind.

Arizona reports foreclosures rose over 40-percent last year and Colorado states 1 of every 345 household have filed or are on the brink of filing. At present, the only states immune from skyrocketing foreclosure rates are Vermont, Maine and the District of Columbia. However, experts predict these states will see an increase in filings when adjustable-rate mortgages start escalating later this year.

How did this explosion of foreclosures occur and why was it allowed to happen? The problem stems from the fact that millions of American financed homes they could not afford using zero down payment, interest-optional balloon payment loans. As adjustable rates increased, mortgage payments doubled or even tripled. Individuals struggling to make their $1,000 note payment, are now looking at $2,000 to $3,000 monthly payments. The sad reality is, they simply do not possess the financial means to pay their note.

Americans have always strived to reach the American Dream of home ownership. When no-down payment loans were offered, people were attracted to them like flies to honey. They were suckered into sub-prime loans and invested in homes beyond their means. When the bubble burst, their dream quickly became a nightmare and many have lost their home to foreclosure.

Foreclosures not only have a devastating effect on the homeowner. They also affect the lending institutions and local community. Homeowners who live in communities with high foreclosure rates are forced to pay higher property taxes, local taxes and increased fees for utilities. There is also an increased potential for crime, as unscrupulous characters use foreclosure homes to conduct illegal business, such as the sale of street drugs.

Real estate experts claim each foreclosure costs lending institutions approximately $80,000, while preventing foreclosure costs less than $3,500. If this is true, why are we seeing such abundance in foreclosures?

The bulk of the problem stems from the fact that many people facing foreclosure become paralyzed with fear. They avoid contacting their lender and instead wait for the bank to retain ownership of their property.

There are steps you can take to stop the foreclosure process. First and foremost, contact your lender. Speak to someone in the Loss Mitigation department or contact the U.S. Department of Housing and Urban Development. HUD offers free credit counseling through approved agencies and can help negotiate with your lender.

If things have gone too far and you are unable to stop the foreclosure process, it isn't the end of the world -- although it may feel like it at the time. Before you throw in the towel, conduct research online or by visiting your local library. There are pre-foreclosure options available including loan modifications and short sales.

Analysts claim the housing crisis will eventually make a turn for the better, but predict it will take three to five years to recover from the onslaught of foreclosures. For investors, there has never been a better time in history to invest in real estate. With an abundance of distressed properties being offered for pennies on the dollar, now is the time to buy.

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