The following is an example of a report I will share with an homeowner who wants to keep their home.  It is not what I would use for a letter to contact a homeowner, but is something I would use to leave at the door, or go over with them in person. 

Remember the excitement, and "warm fuzzy" feeling you had when you bought your home? But something has happened along the "road of life" to put a roadblock in the way of home ownership. Now you are faced with the reality of a foreclosure of your home. There are many situations that put people into foreclosure, and each situation is as unique as the people involved.

One thing that you should not do is run away from the situation. Many times people just mysteriously disappear. They move out of the house that they still own. They own it until the moment that it is auctioned. Many times they have given up equity that they could have had, if they had stayed and sold it to an investor.

1. COMMUNICATE WITH THE BANK
The first time you are going to be even a little late with the payment, call the bank, or mortgage lender. Call them before they call you. Tell them you will be late, and when they can expect payment, and why it happened.
Many people try to avoid talking to the bank. This is normal to try to avoid an uncomfortable situation. If you wait until it has gone to an attorney's office, and the notice is in the paper, it is much harder to deal with the bank.

2. BE HONEST
Keep your promises when you talk to the mortgage company. If there was a situation that made you not be able to pay your payment, they may ask you to write a "hardship letter". This isn't as dire as it sounds, but is simply an explanation of the unusual circumstance that put you behind. If this is a one time situation, and now you will be able to keep up with payments and catch up your back payment, the situation will be resolved. Even with your promise, they may ask for proof of income, and either ask you to fill out a paper that shows your budget, or go over it on the phone. Sometimes at this point people feel irritated, and do not think out the budget. If it shows you do not have enough for your needs by what you tell them, you may not be eligible for a work out.  The bottom line with the bank, is that they want their money.  If you have a source, retirement fund, insurance that can be cashed out, or other savings, or a relative or friend to lend you money, you should consider this, even if there are penalty payments.  A penalty on withdrawal would be better in most instances than to lose your house.

3. ASK IF THERE IS ANYTHING THAT CAN BE WORKED OUT
If you are more than one payment behind, possibly the mortgage company will do a "workout agreement" with you. Sometimes they will ask for a certain amount now, and work out the next few payments with adding on enough to make up the delinquent amount. Sometimes a forbearance will be given. This is often done when medical situations have caused the problem. One forbearance solution would be to tack the delinquent payments on to the end of the loan. It does depend on the bank, and the particular person you talk to. Often in the early stages of foreclosure you will talk to a different person every time you call the bank. Don't be afraid to talk to someone else by making another call, if you and the personality of the personnel did not click. Also, an investor can often help you talk to the bank. You will have to sign a consent form for the investor to be allowed to talk to the mortgage company.

4. SELL THE HOUSE
If you have started early enough, and your house is in reasonable condition, you may be able to make a retail sale of your home. You may sell it on your own, or list with a Realtor. Just be sure the realtor's commission will be covered in the difference of the payoff, taxes, and other fees. Also, the mortgage company usually insists on the home being closed on, before the auction, or sometimes five days before the auction. Saying a closing is scheduled, or someone is really interested, usually is not good enough for the mortgage company.

If you want to be sure of a sale, try selling to an investor. Most investors are private individuals, some will have company names, and some will work with more than one person in the company. Investors have been taught how to work with mortgage companies, and different ways of purchasing the house to best solve the problem. Different ways of purchasing a home are the following. The investor may buy your home outright for an agreed price. Sometimes it will be lower than you would hope for in a different circumstance, but it will be better than having a foreclosure on your record. The investor may catch up your payments and fees, and continue to pay on your loan, until they have sold it. This is called buying a house "Subject To", or "Agreement for Deed". Another way, especially when there is little equity in the home, is to work a "short sale", with the bank. This can only be done by someone other than the homeowner. It means the bank has agreed to take less than the amount that is owed on the loan, for a sale. It also helps to start early on this, not a couple days before auction. Another method of sale, that should be used with caution, to make sure all parties understand, is selling the home, by any of the above methods, then leasing the home back to the original owner, with the agreement that they may purchase the home back at an agreed price in the future. Be careful! Misunderstandings can come from this. In any of the sale methods there can be an agreement to pay some of the equity to the homeowner, except in a short sale. But even then, a small payment for goods, or a service like cleaning can be made to help the homeowner move on.

5. FILE BANKRUPTCY
This is a viable situation if you have the money for the filing fees, and you will have an increase of income in the future. It stops the auction. But you will now have to work out a plan to pay off your debt, and pay the bankruptcy court trustee monthly. Usually you end up having to pay out more than before, because of the need to catch up on your debts. If you fall behind in your mortgage payments, you will still possibly loose your home. Be sure to know what is involved in bankruptcy, and how long it will affect your credit before filing. It is not the "cure all" many people think.  Also new bankruptcy rules prevent many people from qualifying for bankruptcy.

6. DEED IN LIEU
This simply means to turn the deed of your home over to the mortgage company instead of foreclosure. This would have to be done before the filing process. It will be on your credit report, but may be viewed with more favor than a foreclosure.

Whatever the outcome of your pending foreclosure, just be aware that there are steps you can take to save your home. Even if you have to sell your home to avoid foreclosure, nothing is unusual about moving. People move all the time. In the future, you will most likely be past the problems of today, and be able to view them as a distant memory.