First of all, call your mortgage company. If they don’t hear from you, they expect the worst, that your are some scumbag looser trying to weasel your way out of the upside down home you are in. How do they know if they don’t talk to you?

When you do talk to them, be more than honest. Tell them of your hardship in graphic terms, how your dog just died and you had to send the kids to the psychologist to deal with the grief and now can’t afford to make your payments. Seriously though, don’t be too farsical, as mortgage companies don’t care that you can’t make your credit card payments.

Some companies are now willing to modify your exising mortgage, only because the government is giving them loads of cash to do it. Ask if you might be eligible. If you have had a change in circumstance (i.e. lost your job) this option is probably your best, and only bet.

If the mortgage company won’t help you here, call your Congressman’s office and tell him (or his lackeys more than likely) your sob story. You might be surprise how a call from a Congressman can get the modification ball rolling.

If you aren’t eligible for modification, ask your mortgage company about delaying or reducing your payments temporarily. If you just need time to get on your feet, this plan may give you more time to work out an alternative or get caught up. Be aware though that sometimes your payments will go back to normal, and the past due will be added back in as well, so your overall payment will be MORE than before.

If you don’t think you will ever get caught up, think seriously about selling your property. If you can’t pay for it, and haven’t been able to for some time, it probably won’t get better. If the market is hot (and aren’t they all these days), price your home competitively, yet not too low, so that you can come out with half a skin at least, yet sell it relatively quickly before it slips into foreclosure. Talk to a real estate agent to get the value of your house to see if you can get out or not. If you are upside down (owe more than it’s worth), read my article on short sales.

If none of that works, ask about a deed in lieu of foreclosure. The mortgage company will simply “take back” the home for the amount of the note, and you will owe nothing. It will still not look very good on your credit report, but it isn’t a foreclosure and you won’t be left with a deficiency judgment.

You see, when a mortgage company forecloses on a house, they will try to sell it to the highest vulture for about a third of what it was worth, and whatever is still owed on the note is still technically your responsibility. If they want, the mortgage company can go to court for a deficiency judgment to collect that amount and you will be paying on that for the rest of your years, bad news. Best if you can avoid a foreclosure any way possible.

In a last ditch effort, you can ask your mortgage company to “Produce the note”. This is something you will need to get a lawyer for, as it is a pretty complicated process for the amateur. What people have been doing with this strategy though is often holding up the foreclosure of their homes, which gives them more time to work out other options.

The theory is, most mortgage companies and banks that gave you the loan no longer hold the note on your property. The debt has been cut up, sold on, and repackaged countless times, and often banks can’t even find the original note.

When you are being foreclosed on, you can ask the company doing the foreclosing to show you proof that you owe what they say you do, which would be the note on the property. It may take a long time for the note holder to find this original document, which gives you more wiggle room.

People are reporting that this strategy delays, and in a few rare cases, eliminates foreclosure, as the note may never be found. Your lawyer may be able to use this procedure after foreclosure proceedings have already been started, giving you more time. Use that time you have to sell, barter, or lease your home or borrow from Uncle Joe to avoid a foreclosure if you can.