Counseling

• The U.S. Department of Housing and Urban Development (HUD) requires all of its approved state housing authorities and nonprofit housing counseling agencies provide free foreclosure prevention counseling sessions. HUD trains these companies and their employees in how to help homeowners prevent foreclosure and explain all of the negative consequences that come with foreclosure. Every state has a housing authority office and most areas have at least one nonprofit housing counseling center that provides this free service.
  
  

Communicate

• Homeowners facing foreclosure should communicate as much as possible with their current lender. Contrary to popular belief, banks do not want to foreclose on homes. Foreclosing on a home costs the bank thousands of dollars, and banks are not in the business of selling homes. They would much rather receive the payments owed on the loans they provide than foreclose on a home. Banks will work with struggling homeowners to find ways to keep them in their homes and prevent foreclosures. In addition, the federal government created several programs designed to prevent foreclosures.
  
  

Modification

• A homeowner should check with his current lender to see if he qualifies for a modification. A modification permanently changes the loan in several different ways, creating a payment that should be affordable. The new loan payment should not exceed 31 percent of the homeowner's gross monthly income. The homeowner must complete a three-month trial period before the lender permanently changes the loan to the new modified terms.
  
  

Sell the Home

• As foreclosure can take so many months, it's often quicker to sell the home. It also allows the homeowner to keep any equity built in the home, minus selling costs and commissions. As home values in some areas have depreciated to an amount less than what is owed on the home, many lenders allow homeowners to sell these homes under a short sale agreement. Homeowners must receive permission from the lender to short sell the home, and the lender will review the purchase agreement. Often one condition of short selling a home is the homeowner may not receive any funds from the sale.
  
  

Deed-in-Lieu

• The homeowner can also choose to voluntarily give the home back to the lender by using the deed-in-lieu process. This saves the lender the cost of court fees and going through the entire foreclosure process. Some lenders even offer relocation assistance to homeowners who use their deed-in-lieu programs. The homeowner contacts the lender and arranges to sign over the house to the lender. Some lenders provide some relocation assistance and flexibility to homeowners who voluntarily sign over their homes.