Sidestep landmines that can lead to foreclosure

5. Explore the “short sale” or “deed in lieu of foreclosure” options. Let’s say your house can only be sold for a dollar amount that’s less than the amount you still owe on it. If that’s the case, your lender may agree to a “short sale” – that is, it will take what you can get for the house and forgive the rest of the balance owed. Or, if you simply can’t find anyone who wants to buy your home, your lender may agree to a “deed in lieu of foreclosure.” That means you would hand the deed to your home over to your lender voluntarily, and your lender would cancel out your remaining debt. This would be less damaging to your credit rating than having your home taken away from you in a foreclosure. In either scenario, it would be a good idea to get help from a lawyer, accountant, housing counselor or other adviser who is familiar with these approaches.

6. Don’t give your money away to the wrong people. You very well may be approached by foreclosure-prevention companies that will offer to negotiate with your lender on your behalf. Don’t take the bait! In the best-case scenario, the company will be a legitimate business but will charge thousands of dollars for help you could get for free. In the worst-case scenario, you could end up unwittingly signing over your property’s title to a fraudulent company in a “foreclosure rescue” scam.

7. Seek out legitimate help. Considering how many con artists have emerged during the mortgage meltdown, it can be difficult to know where to turn. Here are some options to try that aren’t scams:

• You can contact a housing counselor who is approved by the U.S. Department of Housing and Urban Development by calling (800) 569-4287 or visiting this site. HUD-approved counselors can give you free or low-cost guidance and even represent you in negotiations with your lender.
• You also could be directed to HUD-approved counselors and free help via the Homeownership Preservation Foundation by calling (888) 995-HOPE.
• Another option is to get help from a housing counselor affiliated with the National Foundation for Credit Counseling by calling (866) 557-2227 or visiting this site.

8. Set financial priorities that fit your current circumstances. When you’re feeling absolutely overwhelmed financially, it can be difficult to know which bills to pay first. Here’s the main thing to keep in mind: Keeping your home – or walking away from your home on your own terms and avoiding foreclosure – should be your top priority. Your relationship with your mortgage lender is the relationship to preserve first and foremost. In negotiations with your lender, you can show how serious you are about making things right by demonstrating that you’ve sold assets, taken on extra work and eliminated optional monthly expenses, all with an eye toward reinstating your mortgage loan.

9. Consider filing for personal bankruptcy protection. This is a last-ditch tactic to be sure, but it may be better for you than a foreclosure. With a foreclosure, your home will be taken away from you, your credit rating will be seriously damaged and you’ll still be saddled with all of your other debts. All of this can make it very difficult for you to find housing again – including rental housing. A bankruptcy filing also will hurt your credit rating for years to come, but here are the key differences: You’ll be solvent and debt-free, and with a Chapter 13 bankruptcy you may get to keep living in your house. For more details about whether the bankruptcy route might make sense for you, check out this Nolo site.

10. Maintain your self-esteem. Try very, very hard not to panic or beat yourself up right now. This is a time to stay sharp, take charge of your situation and stick up for yourself. Remember that you’re certainly not the only homeowner in America who’s struggling right now. Direct your anger and negative emotions toward people who may deserve it – say, for instance, a predatory lender who may have deliberately locked you into a bad loan. If you’re convinced that loan terms and risks weren’t fully disclosed to you, file complaints with the Federal Trade Commission by calling (877) FTC-HELP (382-4357) or visiting this site, and with your state’s attorney general’s office or consumer affairs department. You can start the process of finding contact information for your state by clicking here.

Sources and resources

• U.S. Department of Housing and Urban Development
• Nolo, a provider of do-it-yourself legal help for consumers
• National Foundation for Credit Counseling’s Homeowner Crisis Resource Center
• Federal Trade Commission 
• Better Business Bureau’s warning about mortgage foreclosure scams 
• Homeownership Preservation Foundation 
• John Schoen’s Answer Desk column on msnbc.com 

Also in msnbc.com business Local governments face hard budget choices One casualty of the recession: U.S. mobility ConsumerMan: HELP for homeowners Your Career: Take this job and shove it!   Video: seeking more bang for stimulus bucks

MORE FROM GUT CHECK

Gut Check Section Front

N.Y. town copes with foreclosure fallout Poughkeepsie seeks foreclosure solutions 10 Tips: Facing foreclosure? Here's help More than homeowners suffer from foreclosures Gut Check Section Front   Add Gut Check headlines to your news reader: