10. Tighten your belt. Getting rid of luxuries like cable TV will give you credibility when you sit down to renegotiate. To bring money to the table, be willing to cash in assets such as jewelry or a car. "Servicers want to see you make sacrifices. Show some effort," says Michael van Zalinger, director of home ownership services for Neighborhood Housing Services of Chicago. And be sure to draw up a detailed accounting of your expenses and assemble pay stubs, benefit statements, and tax returns. You will need these records when you talk to the bank.

11. Get familiar with various mortgage workouts. The best solution would be to refinance into a long-term mortgage with a sensible rate, but—given increasingly tough requirements around borrower credit ratings—you may not qualify for this option. You also may not be able to afford the fees. Moreover, a report just out from a group of state regulators says the refinance option has "nearly evaporated."

• A repayment plan is easier to get and will give you short-term breathing room. In this scenario, the lender tacks a portion of the amount past due onto successive monthly payments, possibly after demanding some of the past due amount up front. However, many consumer advocates advise against repayment plans for homeowners with subprime ARMs. "They’re not a solution and may only forestall the inevitable," says Zinner.

• A loan modification is better: The lender lowers the interest rate and/or lengthens the amortization schedule. The Center for Responsible Lending considers true restructuring the best solution. A housing counselor or attorney can help you explore this option.

• Your last resort is to give up your house. If you owe more than it’s worth, the lender may permit you to sell it while forgiving the remaining debt. This way, your lender avoids foreclosure costs, and you avoid damaging your credit. You can also bail by surrendering your deed to the bank before your lender actually files for foreclosure. If your lender accepts your offer of a “deed in lieu of foreclosure,” as this option is known, you voluntarily transfer title, move out of the house—and on with your life. You avoid the notoriety of a foreclosure, which involves publication of the action in a local newspaper, a sheriff's sale of your home, and eviction. Your credit rating will still take a hit, but you will dodge the foreclosure bullet.
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