Unexpected life changes are often a contributing factor to foreclosure – especially those that impact your finances, such as:

Loss of employment or reduction of hours
Major illness or injury
Divorce or separation
Death of a spouse
What makes it so difficult to think about foreclosure during times of crisis is that you are so focused on the problem at hand and not likely to have the time or energy to think about how it could impact other aspects of your life. That is why a plan that was developed before any problem starts is the best protection.

If you have a "Plan B" in place, you won't have to organize your finances while you are stressed about finding a job or dealing with a major illness. The plan will already be done – you will need to just follow it.

Financial warning signs
There may not be a major life change to signal potential trouble – you simply may be having a difficult time properly managing your finances. Don't be fooled into thinking your credit card problems won't affect your mortgage. It is important to realize that financial difficulties in one area can, and often do, spill over to other areas. These difficulties are all warning signs of financial problems that can lead to foreclosure on your home if you do not act quickly. They include:

Maxing out credit cards
Using credit to pay for day-to-day expenses, such as groceries, utilities, etc.
Being unable to pay your bills on time
Paying only the minimum amount on credit cards
Applying for new credit cards after maxing out on existing ones
Having to choose which bills to pay
Talk to a housing counselor immediately if you see these signs You may be able to get your finances back on track before foreclosure becomes a reality.

Early Steps to Prevent Foreclosure
You already know a Plan B is important, but what should it include? The first steps to take in creating your plan are to:

Save money.
Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems.
Reduce expenses.
Think about where you can save money; for instance, temporarily canceling cable or your gym membership. By paring down to the bare necessities, you may be able to save a significant amount of money. And even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps.
Use a budget work sheet to help think about which changes you can make if you find yourself facing financial difficulties.
If you've put your Plan B into action and still find yourself having trouble paying the mortgage, you should:

Call your lender.
This is the single most important thing you can do. Lenders want borrowers, not properties – they would prefer to see you keep your home. Most will work with you while you get back on your feet.
Be honest with your lender.
Different situations require different solutions. It will matter to your lender to know if your financial problems are temporary, for example, due to an injury that puts you out of work for a few months, or are more long term, such as a cut in pay or a layoff.
Know what you owe.
Have a clear picture of what your debts are and make your mortgage the priority if you have to make choices. Debt collectors can be very aggressive, but if you can't pay all your debts, make sure your home is protected from foreclosure by paying your mortgage.
Talk to a housing counselor.
A non-profit housing counseling agency may be able to help you restructure your bills so that you have an easier time paying them. Additionally, they can help you create a budget that suits your specific needs.
Contact a housing non-profit.
A housing non-profit can give you valuable advice. The HOPE National helpline, 888-995-HOPE, is dedicated to helping homeowners facing foreclosure 24 hours every day. Spanish – speaking counselors are available.
The following information and more is available online at the Freddie Mac® “Buying and Owning a Home” web site located at www.FreddieMac.com.