Fighting to Keep the Roof

"The lender may tell you to come back after you've missed two payments," Guttentag said. By that time, your credit is shot, making it tough to borrow money elsewhere. If the lender then forecloses, that lender is protected against loss because the equity in your home could cover the loan balance and foreclosure-related costs, he said.

The riskiest borrowers typically don't have much equity, often because they have put little or no money down to buy their homes or have taken out second mortgages. As the housing market has softened, and home prices stagnated, those borrowers have found it hard to sell or refinance their way out of trouble.

Even if they could refinance, many borrowers with subprime loans face steep penalties if they pay off their loans early. Meanwhile, in response to the mortgage crisis, lenders have tightened their standards and made it harder for risky borrowers to qualify for new loans.

"It's a paradox, but the borrower who gets into trouble and has no equity is in a stronger negotiating position with the lender than the borrower who has equity," Guttentag said.

Work With the Lender

If refinancing is not an option, take a look at your mortgage statement and call the company that manages your loan. That call should be made quickly. The more time passes, the more a homeowner's credit tanks, limiting a lender's ability to work out a payment plan.

Lenders tend to be most amenable to the possibility of a forbearance, in which they suspend or reduce payments for a few months and then tack on portions of those payments to future ones. They will also consider lowering monthly interest rates, extending the life of the loan or altering the loan in some other way.

"Borrowers should seek modifications," said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. "But the modification should not just keep the wolf away for a while longer. It should actually create an affordable loan."

So far, the number of mortgages modified has been modest. But the numbers are expected to rise substantially as more adjustable-rate mortgages begin to reset at higher rates at year's end, says Rod Dubitsky, an analyst at Credit Suisse.

"Right now, many people experiencing a reset have a lot of equity because of home-price appreciation at the end of 2005," said Dubitsky. "By the end of this year, fewer and fewer borrowers will have equity to refinance or sell their homes."

Lenders say it's in their interest to work with borrowers. Servicing a healthy loan costs them about $50 a year, and managing a delinquent or foreclosed one costs them about $1,000 and $2,000, respectively, said Robert Lacoursiere, an analyst at Banc of America Securities.

However, that does not mean there's a solution for every troubled borrower. Homeowners whose incomes cannot support their mortgage may get nothing more than a sympathetic ear -- if that -- from whoever handles their mortgage. The ultimate solution may be to walk way from the house.

"There's no incentive to work out payment arrangements if it only delays the inevitable," said Greg McBride, senior financial analyst at Bankrate.com, a personal finance Web site.