Is there anything they can do to save themselves and their homes? Well, the advice they will get from counselors is to contact the lender and ask for an adjustment in the terms or length of the mortgage loan.

Lenders have always had departments called "Loss Mitigation". Those departments were staffed with people whose jobs were to help borrowers work their way out of their financial troubles. Often a work-out could be good for both the financially troubled homeowner and the lending institution.

What happens when those loss mitigation departments are hit with millions of foreclosures? They grind to a halt. There are just too many people asking for help. Way too many. But there are also other factors that some into play.

The expensive of renegotiating adjustable-rate loans, concerns about bank failures and investor lawsuits have put the brakes on many lender's ability to give borrowers much help.

Oh sure, Washington has issued a call for banks and lending institution to help those facing foreclosure to save their homes. That action makes your government look good in a newspaper article, but the lenders are expected to shoulder the entire loss of millions of mortgage dollars. The FHA refinancing plan requires lenders to reduce the principal amount of each subprime loan by at least 10%. Those are dollars lost to the lender's stockholders and those investors just won't stand for it.

The problem begins as soon as a homeowner decides he will loose his/her home if they don't contact the lender and ask for help. Now who should they talk to? In many case those mortgage loans have been packaged and sold to investors around the world. How do you find someone who has the authority to help? All too often the home is lost before the proper person or servicing agent can be found.

Here's another stumbling block. If you haven't missed a few payments don't bother to try for a loan adjustment. If you are current with your payments, but you know you will soon fall behind, lenders don't want to talk with you.

Yes, I know that sounds crazy. Wouldn't you think that it would be a financial benefit to a lender to help a borrower before they started missing payments? After all, there is some profit for the lender in every payment. If they wait until payments are missed then some profit is lost forever.

Banks are between a rock and hard place. The Federal Deposit Insurance Corporation, they insure your bank deposits, requires banks to maintain a certain capitalization or face the possibility of having their doors closed. Many banks have fallen below that minimum and have been ordered to shut down operations.

Dozens of others are close to becoming undercapitalized. They are hanging on by their finger nails. If they begin adjusting and forgiving mortgage loans they will be the next to be shut down.

When a bank is in trouble that means they aren't producing the profits expected by their shareholders. When those shareholders see banks giving away their money in mortgage adjustments they are apt to threaten lawsuits against the banks. That's another reason bank are reluctant to participate in the modification of many delinquent mortgage loans.

Finally, if you are advising a financially distressed homeowner who is facing foreclosure, there are a few things you should impress on them before they contact their lender. First, understand that a mortgage servicing agent will not modify existing loan payments unless they are clearly unaffordable.

You have to prove hardship and back up that hardship with documentation. The agent won't even consider modifying the loan just because the interest rate is about to reset. And you must prove you have enough income to stay current with mortgage payments if they do adjust your loan.

It's a tough real estate market and there is little indication that it will get better in the foreseeable future.