Thousands more are still scraping by to make the payments, and wondering why. They're tempted to just hand the house to the bank and walk away to make a fresh start. It's easy to see why someone would think that way if their payment had just doubled or tripled due to an ARM reset - or if they're having to move away to find employment.

But... the act of walking away could throw a major kink in plans to start over. Letting your house go to the bank - either voluntarily or through foreclosure, will cause your credit score to drop like a rock. Experts say you can expect a drop of at least 100 points.

And, since both prospective employers and prospective landlords are apt to judge you by your credit score, that fresh start might be difficult to accomplish.

Foreclosure also leaves you open to a deficiency judgment... with your lender trying to collect the difference between what you owed and what they gained from the sale of the house after foreclosure.

A second alternative is the short sale. In this case, you find a buyer who will pay the current market value, and the bank forgives the difference and marks the debt paid. Depending upon the bank's policies, you might even get away with no damage to your credit score. They have to report to the credit bureau, and they can report either as "paid satisfactorily" or "settled for less than the full amount due." If they choose to report "paid satisfactorily" then your FICO score will go undamaged.

The big benefit is that under a temporary tax law change, in most cases you won't owe income tax on the forgiven debt if this was your primary residence and the forgiven debt was less than $1 million ($2 million for couples filing jointly). This law went into effect in 2008 and runs through 2012.

But perhaps you don't need to take either of these routes. Negotiation could keep you in your home. As soon as you start to fall behind, contact your lender and see if you can change your interest rate or other terms in order to keep the house.

You may be approached by any number of companies offering to aid in the negotiations - for a fee of up to $1,500 - but say no. Most are bogus and all are unnecessary. The help you seek is available for free.

The National Foundation for Credit Counseling has $16 million in Federal funding for the purpose of helping homeowners stay in their homes - and HUD counselors are available in every state. You'll find links to counselors in your state at: http://www.hud.gov/foreclosure/local.cfm