Quantifying the Problem

• Unless they have a good financial cushion, such as a working spouse or hefty retirement account, people who lose their jobs are likely to fall behind on their mortgages. A CNN article from 2008, when many Americans were unemployed, reported that nearly half of the mortgage delinquencies reported by mortgage giant Freddie Mac were due to job loss. By the end of 2009, one in about 23 homes across the country were in foreclosure, according to Bankrate. Fortunately, by 2011, the national unemployment rate had improved somewhat, noted the National Conference of State Legislatures' website, although foreclosures were still historically high.
  
  

Legislative Solutions

• According to the NCSL, various states were considering legislation as of April 2011 to help stem the tide of foreclosures due to job loss. A whopping 40 states and the District of Columbia had introduced such legislation. Some would delay the auction of foreclosure properties, while others would require lenders to give homeowners the right to mediation before foreclosure occurs. Previous federal legislation, the Home Affordable Foreclosure Alternatives Act, makes it easier for struggling homeowners to short-sale their homes and encourages lenders to work with struggling homeowners to provide loan modifications. However, banks routinely came under media pressure for approving just a small number of modifications.
  
  

Individual Solutions

• Homeowners who find themselves facing foreclosure due to job loss should reach out to their lenders as soon as possible to explain the situation. A financial hardship letter, as well as proof of the financial hardship, may help consumers secure some leeway. Lenders may allow struggling homeowners to make partial mortgage payments temporarily, or they may lower the interest rate to make monthly payments smaller. However, homeowners may find themselves mired in paperwork and confusion on the part of bank employees. This quickly became a common complaint following the passage of the Home Affordable legislation.
  
  

Other Considerations

• The longer homeowners wait to reach out for help, the harder it will be to get it. That's because the lender will have already spent money on the foreclosure process. If you expect a job loss to last a while, contact the lender even before you fall behind to give it a heads up on your financial situation. Alternately, if you expect the joblessness to be fleeting, consider borrowing money from a pension or retirement account, or from a close family member, to stay current on your mortgage.