Special section - Fighting foreclosure
mortgage
Foreclosure counseling for homeowners

Legal aid organizations: There are many avenues to free legal aid for lower- and middle-income homeowners facing foreclosure. The foreclosure laws in your state have a big effect on how much an attorney can help in preventing foreclosure. Some states require servicers to go through a longer and more involved legal process before they're allowed to sell a delinquent borrower's home. In those states, legal help can make a big difference for embattled homeowners. Still, no matter where you live, having an attorney to negotiate and review all your documents can be extremely helpful.

"If we can see that some kind of illegality happened in the execution of the loan, then it really helps," says Kathleen Skullney, project attorney for the Maryland Foreclosure Assistance Project. "If we do, we can say to the servicer, 'Our borrower has legal defenses. Why don't we work it out?' It's an incentive to talk." You can find free legal aid at local offices all over the country. To locate an office near you, go to lawhelp.org, a joint project of the Legal Services Corporation and the Open Society Institute. Just click on your state and then select "Housing."

NeighborWorks America:  NeighborWorks America is a network of 238 organizations across the United States that provides counseling and education to help homeowners work their way to financial solvency. Counselors also may contact lenders to help develop a payment plan, among other things, Snyder says.

Don't wait until it's too late

Although these organizations provide a tremendous amount of information, they are a first step. There's no getting around the fact that a call or visit to a lender typically is needed, Jacobs says. That's particularly the case if the individual would like to restructure the payment schedule.

"We feel that we are so much more constructive if homeowners can come to us ahead of the actual foreclosure process," says Skullney.

What's more, avoiding foreclosure may require significant lifestyle changes. An individual may have to develop and stick to a more modest budget. In extreme cases, counselors may recommend a move to more affordable living arrangements.

It's always best that borrowers reach out to a counselor or organization before their troubles have reached a crisis point. "There are more tools available if you're 60 days behind, versus if there's a sheriff's sale next week," says Gugin. For instance, the lender may consider a change in the payment plan or allow the borrower to defer several payments.

In addition, counselors can help homeowners learn more about whether they are eligible for the federal government's Home Affordable Modification program, in which lenders agree to lower a struggling borrower's monthly mortgage payment to as low as 31 percent of the borrower's gross (pretax) monthly income.

Consumers should know what they can afford and how different mortgages work before taking on responsibility for one, says Snyder. Most agencies strive to offer education to prospective homebuyers before they get a mortgage.

"We strongly believe that education helps borrowers," Snyder adds.

Claes Bell contributed to this report.

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