Bank foreclosing? Try one of these options
By Michael Estrin • Bankrate.com

With the number of foreclosures rising, homeowners are looking anywhere they can for help. But while there are a number of avenues promising relief, each has its own pitfalls.

The sheer scale of the problem has created a labyrinth of rules that no consumer should navigate alone, says Jim Sahnger, marketing director for Loan LifeSavers, a loan modification company in Palm Beach Gardens, Fla.

But as homeowners approach this new and harrowing experience, they wonder whom they can trust, what they can rightly expect and what their best course of action is.

These are difficult questions, but acting quickly and talking to a range of specialists are the way to start.

Can't the Obama mortgage plan help?
Even by President Barack Obama's own estimate, the government mortgage plan, known as Making Home Affordable, won't help every homeowner. In fact, the plan is designed for about 9 million homeowners. According to Moody's, a New York-based financial research and ratings company, there are an estimated 14 million homeowners in trouble, and that number is rising.

The plan works two ways -- loan modification and refinancing. Take Bankrate's quizzes on modifications and refinancing to see if you're eligible, and read this tips sheet on fighting foreclosure.

To refinance under the plan, homeowners must have a Fannie Mae- or Freddie Mac-secured loan, be current on the last 12 payments, have stable income and owe less than 105 percent of the value of their home.

To modify a mortgage under the plan, homeowners must demonstrate a significant hardship and a lack of liquid assets, and they must show that they can make the modified payments. Additionally, homeowners can only seek to modify loans made before Jan. 1, 2009.

A government-created eligibility checklist can be consulted at the Making Home Affordable Web site.

The first question you must ask
So what are the options for homeowners who are looking to hang on? That depends on what their circumstances and long-term goals are, says Walter Walker Jr., co-author of "Foreclosure: The American Nightmare -- Strategies for Preventing, Surviving and Overcoming Foreclosure."

"Regardless of where they go, homeowners need to take a hard look at whether or not they can afford to stay in the house even if they do succeed in getting a modification," Walker says.

While Walker believes many homeowners are giving up too early, some people won't find a way to stay in their homes. He says many ads promising painless mortgage modifications deliver only minuscule reductions and false hope.

"If you still have a job, but your rate has adjusted and falling home prices have left you slightly upside down, you'll likely find a lender willing to work with you," Walker says. "If you've lost your job and there's really no hope of making future payments, it's just not going to work."

Yet, financial hardships can work for a homeowner. Sahnger says they are often the fodder for negotiation because lenders are recognizing that they must work with homeowners.