Life after foreclosure
By Marilyn Kennedy Melia • Bankrate.com

These days, record-breaking foreclosure statistics are coming out with numbing frequency. But what happens to the thousands of families after their personal financial disaster is added to the mounting national count?

Unfortunately, once a foreclosure is final, the financial and emotional upheaval is far from over.

While there's considerable pain, most foreclosure victims will eventually become homeowners again, says Jay Zagorsky, a research scientist at Ohio State University.

Still, that won't happen anytime soon, especially since mortgage rule maker Fannie Mae has recently lengthened the time that must lapse between a foreclosure and approval for a new mortgage.

Here's a look at the issues foreclosed families grapple with, and some smart solutions.

Consequences of foreclosure

• Finding a new home • Suffering the credit fallout • Buying another home • Owing an employer an explanation • Getting hit with a tax bill • Living through loss

Finding a new home
The immediate problem is obvious: where and how to find a new place to live.

Lack of cash for a rental deposit is probably the biggest barrier to foreclosed owners getting re-established on their own. Landlords will sometimes accept tenants who have a credit score of just 580, says Maurice Ortiz, marketing director at The Apartment People in Chicago.

But if landlords look beyond a numerical score to credit records, a foreclosure may spook them, since it indicates the potential tenant hasn't paid his housing bills, adds Ortiz. If the foreclosure can be explained, however, and if the rental candidate has a solid job history, he may be accepted.

Moreover, "if you're on the edge, you may have to double your deposit," says Mark Fogelman, president of Memphis-based Fogelman Management Group.

Scraping together a rental deposit isn't easy for cash-strapped foreclosed owners.

"That's why I recommend that people try to make plans as soon as they think foreclosure (is inevitable)," says Patricia Lynch, a corporate trainer with ClearPoint Financial Solutions in Richmond, Va. Anyone who has a FHA-insured loan who's being foreclosed on should investigate the "cash for keys" program, whereby they get a check for up to $1,000 if they voluntarily vacate and leave their home "broom clean," says Lynch.

Suffering through the credit fallout
Once owners default on their mortgages, other creditors consider it much more likely they won't collect what they're owed either.

"Credit cards have a 'default' rate, and (foreclosed owners) could see their interest rate jump to very high levels -- as much as 30 percent," says John Ulzheimer, president of consumer education for Credit.com. "You'll also have a hard time getting a decent car loan," he adds.

If a foreclosure is an isolated event on an otherwise good credit record, consumers may be able to rehabilitate their records and garner better loans and card rates in 24 months, says Ulzheimer.

But since a foreclosure is rarely the former owner's only credit slip-up, and foreclosures are often combined with the fallout of punishing rates, some former homeowners will never climb back up to a good credit score, Ulzheimer says.