First of all, you should understand what constitutes a foreclosure. A foreclosure is basically a "legal proceeding in which the default borrower is extinguished of all rights, title and interest in his underlying property for failure to comply with terms and conditions of the mortgage."

The foreclosure process begins when a borrower defaults on his mortgage payments and the lender files a public default notice, called a Notice of Default or Lis Pendens.

The foreclosure process typically goes like this:

1. In a pre-foreclosure process, you pay off the default amount during a state specific grace period.

2. You pay off the loan and avoid foreclosure by selling the property to a third party during the pre-foreclosure period.

3. Your property is sold at a third party public auction at the end of the pre-foreclosure period.

4. Your lender takes ownership of the property and then resells it to a third party.

Now that you understand what a foreclosure is, you may be wondering what you can do about it. Here are some proven tips if you suspect that your lender is attempting to foreclose on your property:

1. Do not be frustrated or embarrassed. You are not a bad person simply because you are not able to pay your monthly payments. You are experiencing a temporary situation and you can't allow mean creditors to make you feel worse.

2. Have faith. Although it might appear that your situation is hopeless, there is always a way to turn things around. For instance, can you seek a couple of part time positions, borrow money from relatives, or sell some items to help make your payments?

3. Do not ignore your lender's phone calls or letters. If you're having a difficult time making your payments then try to work it out with your lender as soon as you first experience financial difficulties. Don't wait until they start the foreclosure proceedings. Instead, contact them as soon as you can in order to make payment arrangements or discuss your options.

4. Have a plan in place. Don't just call your lender without a plan. Instead, make sure that you provide them with information regarding your current financial status and how you plan on rectifying the situation. For instance, if you lost your full-time job but found two part time ones then call and tell them that. Indicate how long it will take you to make good on your obligations.

5. Do not hit the road. Although it may be tempting to simply get your stuff and hit the streets, you should never just "abandon your property." To do so, would prevent you from receiving government aid as well as tarnish your reputation and credit.

6. Seek help immediately. You might be surprised but there are many organizations that offer grants to help you out when you're in a housing bind. Don't be afraid to seek out assistance from your lender.

In the next section, we will discuss your various options.

Alternatives to Foreclosure Here are some alternative to foreclosure that you may want to consider:

Reinstatement

With reinstatement, you promise your lender a lump sum by a certain date. This amount is then used to bring you current.

Forbearance

With forbearance, your lender allows you to delay your payments for a short time period. This method is sometimes combined with reinstatement. To qualify, you must provide your lender with proof that you have recently received a reduction (or elimination of) your current payments and that you will be able to make future payments by a certain time.

Repayment Plan

With this plan, you are allowed to make set payments with added payments thrown in for good measure. Basically with this option, you pay your regular payments + an additional payment until you're caught up.

Mortgage Modification

Sometimes lenders modify payment altogether and then charge you additional financing to cover the extra payment. This option typically extends the timeframe of your loan.

Special Forbearance

With this type of forbearance, you receive a temporary suspension of your payments.

Mortgage Modification

With this type of plan, you refinance the debt and/or extend the term of the loan which may reduce your monthly payments. To qualify, you must demonstrate that your financial hardship has expired and that you can handle the revised payment.

Pre-foreclosure sale

This option allows you to sell your home before it goes into foreclosure for a lesser amount than you owe. To qualify, you must be at least 2 months behind in payments and sell your house within 3-5 months.

Deed-in-lieu of foreclosure

This allows you to voluntarily "give back" your property to the lender. To qualify, you must not be eligible for any other options and have not been able to quickly sell your home. Some lenders also require that you attempt to sell the house for a specific time period before they will take it back.

Selling Your Home

If catching up is not a possibility; the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

Types of Foreclosure Scams that You Should Avoid at All Costs

Although it is quite tempting to fall for someone to rescue you from your financial troubles, you should keep in mind that these types of offers are typically scams. Here are some common scams that you should be aware of and that you should avoid at all costs:

Equity skimming

A buyer promises to pay off your mortgage or give you a sum of money when the property is sold. You're then told to move out quickly and deed the property to them. You are then asked to pay them rent for awhile. They then, collect your money, don’t pay the bills and your lender still forecloses on the property. Your reputation and credit are shot and you lose money.

Fake foreclosure counseling

Some organizations offer to negotiation with your lender for a fee. Well, you could do these things yourself for free.

How to Avoid Foreclosure Scams

Be leery of offers that appear to be too good to be true (they usually are). One key is to contact the local authorities to make sure that no complaints have been filed against this person. Cooperate with the counselor or lender trying to help you.

• Ask for referrals from credible buyers if you attempt to sell the property on your own.
• Get everything in writing read and understand everything before you sign on the dotted line.

In conclusion, if you’re facing a foreclosure, you are not alone. You have many options and the key to resolving this situation is to work with your lender to create a personal plan of action that works for both of you.