Following the unprecedented time of property price inflation, a lot of us are discovering that our homes are worth less than what we still owe on our mortgages. Due to job losses and the latest downturn in the economy, many of us are still earning far less than we did when the mortgage was used to buy our homes.

This double whammy has created an economic calamity as record numbers of homeowners, now unable to afford their homes, are filing for foreclosure. A foreclosure occurs when mortgage payments are more than ninety days in arrears, and the mortgage loan is in default. The lender takes ownership of the home, issues a notice of default, and initiates foreclosure proceedings. The lender sells the home to the highest bidder in order to recoup their loan money.

You may think there is nothing that you can do to keep your home, but there are actions you can take. Lenders are unlikely to initiate these actions on your behalf, so it is important to be proactive. Don't wait until you're close to foreclosure due to late payments. Contact your lender and find out if you can initiate one of the following options: refinancing, a loan modification, loss mitigation, forbearance, payment forgiveness, a repayment plan, partial claim, or short sales.

Free from mortgage payments, a forbearance provides a grace period. A late payment is waived as a forgiveness is provided. As repayment plans are allowed missed payments will be added to the regular payments, they will then be stretched out over a long period of time. Freezing the interest rates is what usually happens with the modification of the loan terms as well as sometimes adding length of the mortgage.

Refinancing refers to the process of completely re-amortizing the loan under different terms. A partial claim refers to the practice of taking another loan from a different source in order to pay missed payments. Like a foreclosure, a short sale results in the loss of a home, but under much better conditions for the homeowner.

Each options must be approved by the lender. In the case the lender has denied a particular option this does not necessarily mean you will not qualify for other foreclosure loss mitigation options. If you are having financial problems in which you cannot pay your mortgage, you should then contact your lender, you should then begin researching all the choices of foreclosure loss mitigation options.