Keeping up with your mortgage payments in a declining economy can be a tough thing. Many people find themselves on the edge of foreclosure or bankruptcy. Have you received notices from your lender asking you to contact them immediately about your mortgage? If you have, you will want to do everything possible to avoid foreclosure.

There are several reasons for a pending foreclosure. Most often the main reasons have to do with some unexpected circumstance such as job loss or unexpected unemployment. Some other reasons people face foreclosures are as follows:

• Sudden illness or a medical emergency
• Divorce
• Death in the family or loss of secondary income
• A job demotion or denial for a promotion
• Adjustable mortgage rate that increases and you are not able to pay the new amount
• Unexpected home repairs

Notice of Default
A Notice of Default is one way you know you are on the verge of foreclosure. The Notice of Default will usually be attached to your home on the front door in bold letters and with bright colors. Many people call it the "Scarlet Letter" of mortgage letters. It basically will inform you that you are behind in your mortgage payments and if you do not pay the debt you have, the lender will seize your home. Most states allow a 60 day grace period for the lender to catch up on their back-due amount before they will attach a Notice of Default to your home. Once the lender has attached a Notice of Default, they must wait 90 days for the borrower to pay back the amount they owe and then reinstate the loan. If the borrower still has not paid back the amount, then the lender must publish a notice in the newspaper for 20 days. After 20 days, the lender may sell the property to the highest bidder in court. Quite often the public notice in the paper is called "notice of default or notice of public auction."

So how can you avoid the nasty scarlet letter and avoid foreclosure? The best way is to avoid the Notice of Default to begin with, if you begin to fall behind on your payments, work quickly to make amends before it is too late. The first thing you need to do is contact your lender immediately if you notice that you are falling behind in your payments. It may be a hard phone call to make and admit that you cannot pay your mortgage, but you need to do it. If you avoid the letter or phone calls from your lender, you will only make matters worse. Your lender may offer a few things that can help:

• Grace Period. Some lenders will allow their clients a grace period to make up the past due amount before they seek any legal action against you. You will be able to work out a repayment plan that is affordable (this is called forbearance).
• Missed Payment Forgiveness. You may be fortunate enough to have a lender that will allow you to miss one months' payment and attach it to the end of your loan. You must agree with your lender that you will be current if they waive this payment and that you will be ready to pay all your payments on time and in full if they waive one or two months payments. This is called debt forgiveness and it is very rare to find a lender who will do this.
• Establish a Repayment Plan. Some lenders will allow you to divide the past due amount and spread it out evenly over one year's payments. For example, if your mortgage is $1,200 a month, your lender could divide this amount and your new payment amount would be $1,300 a month for one year.
• Note Modification. If you have an adjustable mortgage, you and your lender are able to change the terms of your loan. Your lender will have the option of freezing the interest rate before it increases or change the interest rate to a rate that is more manageable for you.
• Loan Refinance. If you meet your lenders guidelines and you have sufficient equity, your lender might increase your total loan balance to include the back payments you owe and re-amortize the loan.
• A Partial Claim. Some government loans have provisions that allow borrows who meet their criteria to apply for another loan that will pay back the missed payments.

Here are some tips to follow if you are unable to make your mortgage payment and you are on the verge of foreclosure:

First, never ignore the problem. The further behind you become in your loan, the harder it will be to reinstate your loan and you will loose your house.

Second, remember to contact your lender immediately. Your lender has several options available and they will be willing to work with you.

Third, open and respond to all mail or notices from your lender. The first few notices you receive from your lender will offer information as to how they can help you avoid foreclosure and what you can do on your own to avoid foreclosure. The next set of mail you receive will probably include notice of pending legal action. If you fail to open the mail, the courts will not consider this a defense on your part.

Fourth, know your mortgage rights. Find all your loan documents and read over them so you know what your lender can do for you if you cannot meet your payment obligations. Take time to learn about the foreclosure laws and timeframes in your state. Contact the State Government Housing Office for more information on these laws.

Fifth, understand foreclosure prevention options. This is usually referred to as loss mitigation. You are basically looking for ways to have the bank accept less money than what is owed on your account. When you contact your lender you will ask for the loss mitigation department and discuss payment options.

Sixth, contact a HUD-approved housing counselor. The U.S. Department of Housing and Urban Development funds free or low cost housing counseling nationwide. By contacting a housing counselor, they will help you understand your options and the mortgage laws. They will also give you tips on how to organize your finances and they will represent you in negotiations with your lender if you need help with negotiations.

Seventh, prioritize your spending. You should always set aside enough money to pay your mortgage first. Of course, medical expenses should always have a high priority too. Review your finances and see where you can cut out unnecessary expenses to cover the cost of your mortgage payment. Some of the first "wants" you can cut out are entertainment expenses such as movies, dinners, sporting events, etc. A few other things you can look at are television expenses such as DirecTV or cable. Memberships to clubs or gyms can also be eliminated in order to provide the needed money for your mortgage. Worst case scenario you may have is to delay or reduce payments on your credit cards or other unsecured debt until you have paid your monthly mortgage payment.

Eighth, use your assets wisely. Many people start looking at their assets and notice they can sell off unnecessary assets such as an extra car, televisions, or jewelry. Look into getting a second job that can help cover the costs of your mortgage. Even if you aren't able to cover the costs of your mortgage, you are at least demonstrating to your lender that you are trying and are willing to make sacrifices in order to keep your home.

Ninth, avoid foreclosure prevention companies. Many foreclosure prevention companies require set up fees or charge you high fees for negotiating with your lender. Several companies will promise to negotiate with your lender, which is normal, however you can contact a HUD housing counselor to do this service for free. Often the cost of hiring a foreclosure prevention company will leave you with a large bill that could be 2 to 3 times the amount of your monthly mortgage payment. Your best option is to use this money and put it toward your mortgage in the first place.

Tenth, beware of foreclosure recovery scams. Far too often people sign a document with a firm who will act on their behalf and state they are negotiating with your lender. In fact you may be signing a document that is the signing over the title to your home and you wind up renting your own home. Always have an attorney present when you are signing a legal document, especially one that concerns your home.

Eleventh, this option is not always your favorite, but it is better than having the bank foreclose on your loan; sell your home. Hire a real estate agent to sell your home and find a home that is more manageable for your payment options.

Foreclosure can severely damage your credit report and prevent you from obtaining future loans. Be sure to asses your financial situation before you get in over your head.