The effects of the national foreclosure crisis leave homeowners wondering about what to do next. Where will they live? With their credit ruined, how will they qualify for a new place to live? How will this affect their family's lives? According to RealtyTrac, the leading online marketplace for foreclosure properties, the number of properties with some sort of foreclosure action against them (default notice, auction notice, bank repossession) has consistently risen for the past eight quarters. During the 2nd quarter of 2006, their site reported a record of 182,317 foreclosure activities. The 2nd quarter of 2007 reported approximately 340,000 foreclosure activities. 2008 reported an approximate increase of 218% in foreclosure activities since 2007.

Foreclosures commonly begin when homeowners default on their mortgage payments for three consecutive months. The first missed payment will have a late fee added onto it. If this payment is not paid within the 30 day period from the first payment due date, the lender will be alerted and phone calls will be made to the borrower. Often times, people have short-term financial problems, which may be caused by illness, employment absence, and other personal issues that may suddenly occur. Repayment plans are the most likely solution to this temporary problem. The repayment plan gives the borrower(s) the opportunity to make their monthly payment including a few extra to make up for the missed payments. A repayment plan usually follows a forbearance agreement.

A forbearance agreement is an agreement between the lender and the borrower, which allows the borrower to make reduced payments, or none at all, until the mortgage is brought current. When people have long-term financial problems, such as job loss or an unexpected increase in monthly debts, a loan modification may be a helpful alternative to foreclosure. A loan modification will allow the terms of the mortgage to be adjusted to a level that is affordable for the borrower. A loan modification reduces the borrower's monthly mortgage payment through the re-amortization of the loan, extends the term of the loan, or reduces the interest rate. This is often the most popular alternative, as it is a more permanent solution. The lender may refuse to grant the borrower any of the above mentioned mortgage solutions. When this happens, the borrower is left with the possibility of having his credit ruined.

The borrower is then left with one of three alternatives to save his credit: a short sale, a pre-foreclosure sale, or a deed-in lieu of foreclosure. A short sale alternative is designed for those who have no equity on their property. The process involves an agreement by the lender to accept the sale of a property for an amount that is less than the amount owed by the borrower. A pre-foreclosure sale will allow the borrower to sell his property and recover up to 95% of his equity before the property goes into foreclosure. This gives the borrower the chance to walk away with some cash in addition to saving his credit from foreclosure. A deed-in lieu of foreclosure is commonly the last result to saving your credit. This process involves voluntarily surrendering your mortgage to your lender.

The foreclosure process continues if no solution is found in due time. After 3 months of unpaid mortgage a notice of default is filed, which is then followed by a notice of sale. Then, depending on the state, the foreclosure process may go through a judicial sale or a power of sale. The property is typically sold at an auction for both types of sales. The difference between the two types of sales is that a judicial sale involves the sale of the property through the supervision of a judicial court, while a power of sale involves the sale of a property by the mortgage holder. In any case, the property is sold to the highest bidder.

Properties that are unsold are taken over by the bank and are considered Real Estate Owned properties or REO properties. The previous owners are typically evicted and have surrendered any rights or matters that deal with the property. Foreclosures are affecting the lives of many individuals and families. If you or anyone you know are facing foreclosure, please review and understand the different alternatives before you panic. There is a solution to every problem. However, the ability to stay informed will be the best bet in finding that solution.