No wonder so many people are nervous!

TYPE OF LOAN

• Do you have an adjustable or fixed rate loan? If it's adjustable, how often can the rate be raised? What is the maximum to which it can be raised? What is the current rate?
• Can you pay off your loan early? If the answer is yes, is there a penalty for doing so? And, when does the penalty expire?
• If you have a fixed rate mortgage, what is the rate?
• Who is your contact person?

CONTACTING YOUR LENDER

Once you have gathered the above information and if you've already fallen behind in payments (or fear you will), contact your lender. Lenders who never hear from those facing payment problems often are forced to begin legal action which can result in foreclosure.

Bear in mind that lenders really don't want property to go into foreclosure. Thinking about it from their viewpoint will give you courage. A foreclosed piece of property leaves the lender with two negatives: real estate in a very poor real estate market and a financial loss.

Knowing these facts gives you some leverage for negotiating. It means that your lender may be willing to work out a new payment plan. Among the options the lender (or you) might raise:

• A lower mortgage rate (permanent or temporary)
• Extending the length of the mortgage
• Smaller monthly payments
• Making up missed payments via a plan devised specifically for you. So, contact your lender as soon as possible. Keep a log of all conversations, including the names of those you speak with, the dates and a summary of the comments made. And keep copies of all e-mails and written correspondence.

Prior to making that first phone call, however, it's wise to have a concrete plan in mind. For example, suggest the dollar amount that you can afford to pay every month. And reassure the lender that if you've lost your job you are actively looking for a new job. Or that you will be taking on part-time work. Or that your spouse is working or plans to work.

Note: If your loan is guaranteed by a federal or state agency, then the lender may be required to provide options to avoid foreclosure. Be sure to ask.

OTHER POSSIBILITIES

If your lender won't budge, your next step is to look at outside assistance. If you have an FHA-secured loan, contact the Department of Housing & Urban Development at: 800-569-4287.

Also check with the Home Ownership Preservation Foundation at: 888-995-HOPE. Known as HOPE, this organization helps homeowners remain in their homes and provides free credit counseling.

The Mortgage Bankers Association (http://www.homeloanlearningcenter.com/) has consumer information and links to helpful resources. Click on "Foreclosure Prevention Resource Center" on the right.

A SHORT SALE

If in the final analysis, you cannot renegotiate the terms of your mortgage and at the same time, your home is now worth less than you owe, you may want to consider what is known as a "short sale." Your lender, of course, will need to approve this solution.

In a short sale, you can sell your home at an agreed upon price and your lender will then forgive the remaining amount due on your mortgage.

$TIP: Under a law signed by President Bush in late 2007, sellers are no longer required to pay taxes on the amount of debt forgiven in a short sale. This protective piece of legislation is retroactive to January 1, 2009.