If you have an Adjustable Rate Mortgage (ARM) loan that comes due for an increase, then adding heavy credit card debt to your upwardly adjusted mortgage payment is guaranteed to turn that New Year hangover into a mortgage migraine. Similar rate increases during 2007 have already taken hundreds of thousands of people back to their lenders in search of refinance solutions. Are you one of the many consumers searching for tips for avoiding foreclosure?

Are you a homeowner who found out that a loan refinance is not an option due to one or more of these conditions?

1. Your credit habits went downhill. Compound missed or late payments on other loans with the increase in your mortgage payment and you simply can not keep up with it all. Your credit scores plunge.
2. Your home's value has decreased because surrounding neighbors' homes have been foreclosed and vacated causing huge depreciation in adjacent homes.
3. You became a statistic in the corporate trend to fight stock price declines by downsizing and reducing employment numbers. No job, no pay, missed payments, more plunging credit scores.

The American dream of home ownership is going up in flames for people facing catastrophic increases in interest rates, missed mortgage payments, and tougher qualification standards that make refinancing impossible for thousands of existing home owners. If you are a mortgage payer facing any or all of the above, then read on for tips for avoiding foreclosure.

Before you pursue one of the options below, recognize that most involve credit review. You need to review your credit report before you march into a lender. There are credit conditions you will have to meet. Familiarize yourself with what's on your credit report.

Foreclosure occurs when the homeowner falls behind in monthly mortgage payments and defaults on the loan. The lender repossesses or sells the home in order to satisfy the debt. You have options that can help you keep your home or at least minimize the impact to your credit history.

Reinstatement

Prior to a foreclosure sale, borrowers have the right to reinstate a delinquent loan. The reinstatement option gives homeowners the opportunity to make up back payments plus any incidental charges incurred by the bank such as filing fees, trustee fees and legal expenses. Paying off the reinstatement amount will cancel the foreclosure and enable the homeowner to continue to live in the home as if no default occurred. For many delinquent borrowers, however, reinstatement is not an option because they are deep in debt and cannot make up back payments, plus other expenses.

Short Sale

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. In other words, if you can come up with enough money to satisfy the lender, they may settle for less that the full amount of the loan. For the lender, having $50K in the hand is far better than having an empty home that is depreciating daily and for which they have to pay property taxes.

Short Refinance

In a short refinance, the lender may agree to forgive some part of your debt and refinance the remaining debt into an entirely new loan. This is usually considered a win-win situation for the lender and homeowner.

Special Forbearance

A forbearance is an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. A forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems.

Borrowers with more fundamental financial problems - such as having chosen an adjustable rate mortgage on which the interest rate has reset to a level that makes the monthly payments unaffordable - must usually seek remedies other than a forbearance agreement.

You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification

A mortgage modification is a modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. A lender chooses to modify the loan because the cost of doing so is less than the cost of default. Loan modifications involve some combination of:

• reducing the interest rate
• extending the length of the loan term
• a different type of loan

A loan modification agreement is different from a forbearance agreement. A forbearance agreement provides short-term relief for borrowers who have temporary financial problems, while a loan modification agreement is a long-term solution for borrowers who will never be able to repay an existing loan.

You may qualify if you have recovered from a financial problem and can afford the new payment amount. Chances to obtain a loan to regain a current status on your mortgage become diminished once you have received a notice of default (NOD). Notice of Default is usually sent after 90 days of the mortgage payment being late.

Partial Claim

The U.S. Department of Housing and Urban Development uses Federal Housing Authority (FHA) Insurance to generate a one-time payment to your lender which brings your loan current. You may qualify if:

• your loan is at least 4 months delinquent but no more than 12 months delinquent;
• you are able to begin making full mortgage payments

You must execute a promissory note. A lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-Foreclosure Sale

This option is for owners who do not care to save the property, or who have no other choice than to let the property go. If you have enough equity in the house to allow you to pay off the mortgage in full, then a sale is usually your best option. This option preserves your equity and what's left of your credit score.

Deed In Lieu of Foreclosure

This option is for a borrower who wants to avoid foreclosure and deeds the property back to the lender in exchange for the release of all obligations under the mortgage. Both sides must enter into the agreement voluntarily and in good faith. This will not save your house, but it is not as damaging to your credit rating as a foreclosure.

In summary, you have some options to consider before you lose your home and destroy your credit reputation. Familiarize yourself with what's on your credit report before you march into a lender. Take this opportunity to enroll in the free Credit Rejuvenation mini-course. There is no reason you should not know exactly what the mortgage officer is going to see.

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