By ALAN J. HEAVENS, The Philadelphia Inquirer
Published: Thursday, Jun. 9, 2011 – 5:13 am, Last Modified: Friday, Jun. 10, 2011 – 5:12 am

Something has happened – you’ve gotten sick, or your hours have been cut at work, or you’ve taken on the increasingly expensive care of an elderly parent… something totally unexpected and financially overwhelming.

You may be able to keep up with the bills for a few months more, but unless the picture changes dramatically, you might miss a monthly mortgage payment very soon.

What should you do?

“If you see problems on the horizon, you need to take action immediately,” said Rick Sharga, chief economist at RealtyTrac in Irvine, Calif., which follows foreclosure trends nationwide.

Long before you find yourself in a hole, contact a financial counselor, Sharga recommends. Even if you cannot avert trouble, he said, “by reworking budgets and having in place a financial strategy that you can discuss intelligently with a lender,” you are in a much better position to negotiate.

You can find a list of counseling agencies approved by the Department of Housing and Urban Development at www.hopenow.com/hopenow-counseling.php. Avoid those that are not approved, experts advise.

Often, folks who have fallen behind on the mortgage wait too long to seek help, and the result is not a happy one.

Early on, “the person you will be talking with is in loss mitigation and trained to find ways to solve the problem,” Sharga said. “If you wait and do nothing, you’ll end up talking to the collection person, who won’t be interested in finding payment options for you.”

When you are 60 to 90 days delinquent on your payments, “it has already made an impact on your credit score, and you’ll have a lot of trouble trying to work things out,” he said.

You can find contact information for 37 major U.S. lenders and mortgage servicers at www.hopenow.com/mortgage-directory.php.

Sometimes, when homeowners who anticipate problems contact their servicers or lenders, they are told nothing can be done until the mortgage becomes delinquent.

“Everywhere I go, I meet people who have had that experience. It was frustrating for them,” Sharga said.

He acknowledged that if you’re current in your payments but foresee trouble, your lender might not be particularly open to modifying your loan or exploring other solutions “if you have a high-risk mortgage and not much equity in your home.”

“If you are current and have a 30-year fixed mortgage as well as a lot of equity, the lender might be more willing to let you refinance into lower payments,” he said.

What options might be available to you?

According to Hope Now, an alliance of lenders, counselors, investors, and others, early on there are a number of viable alternatives to foreclosure, which not only results in the loss of a home but also ruins the owner’s credit. Among them are:

-Repayment plans. You might be able to negotiate one if you are delinquent on your mortgage but can prove that you can set things right within a reasonable period. The delinquent amount would be distributed over a specified time, with part of what is past due added to the monthly payment.

-Loan modification. This changes the terms of your mortgage, with the goal of getting payments current and making them affordable. Interest and escrowed amounts for homeowners’ insurance and property taxes are added to the new unpaid principal balance and re-amortized.

-HomeSaver Advance. If you have a Fannie Mae loan, you may be eligible for this low-interest second mortgage from a servicer to bring your first lien current. The loan is repaid over a 15-year term, with payment and interest-accrual deferral during the first six months.

To determine whether Fannie Mae holds your loan, go to www.fanniemae.com/loanlookup.

-Home Affordable Modification Program. This is a federal initiative to help the most at-risk borrowers. The goal is to reach a monthly payment – including capitalized past-due payments, principal, interest, taxes, insurance, and homeowners’ association or condo fees – that is no more than 31 percent of the borrower’s monthly gross household income.

For details, go to www.makinghomeaffordable.gov.

-Short sale. In this scenario, you sell your house and use the proceeds to pay off the mortgage if you are unable to maintain payments, even if the home’s market value is less than the amount owed.

“Remember that until (a) foreclosure sale takes place, the borrower has the chance to sell the property or come up with the money owed to make the mortgage current,” Sharga said.

A short sale is “a negotiated settlement between the lender and the borrower, and the lender cannot do anything to violate such an agreement,” such as come back after the property is disposed of to demand more money, he said.

-Deed in lieu of foreclosure. In many situations, a homeowner has no option other than to relinquish ownership of the house to the mortgage lender. Under this arrangement, the homeowner transfers ownership, avoiding the lengthy legal hassles of a foreclosure – which takes an average 800 days in New Jersey, 200 days or more in Pennsylvania – and causing less damage to the borrower’s credit, Sharga said.

Information and procedures specific to Pennsylvania are available at www.phfa.org; find New Jersey details at www.state.nj.us/dca/hmfa

Whatever the circumstances, Sharga recommends remaining in the property “while you get your financial house in order.”

“The bottom line is to do everything you can to remain in control of the situation,” he said. “Too many people go into denial and hide. Don’t. Be really aggressive and pursue every option.

“Don’t be a victim of the process.”