How to prevent foreclosure - Refinance your mortgage

Homeowners can prevent foreclosure by refinancing their current mortgage. Mortgage refinancing allows the borrower to consolidate the existing loan, including all late payments, penalties, and fees, into a new loan to allow the borrower to regain control of his or her financial situation with a new loan, possibly having a more favorable interest rate.

Refinance your mortgage - only those with good credit need apply

There are some things to consider however. To prevent foreclosure, legitimate lenders are more likely to refinance a loan to assist a borrower who has undergone a temporary setback, but has otherwise a good credit history, and therefore likely to pay the refinanced mortgage. However, most lenders will not refinance if the loan is more than 60 days late.

Refinance your mortgage - avoid the scams

There are some dishonest lenders who will approve loans to those who are unable to repay, in the hope of taking the house through foreclosure if payments are missed. 

These kinds of lenders will offer new loans with extremely high interest rates, high points, balloon payments, prepayment penalties, and monthly payments above and beyond what the homeowner can realistically afford. 

There are some dishonest lenders who may delay the loan approval decision unnecessarily, then later deny the loan in an attempt to get you to sell the property to them, when you are the most desperate, and at a significant discount. 

I personally spoke with a lender who bragged about how he can get homeowners to sign-over the deeds to their houses to him for back-payments only, then lease the houses back to them, resulting in a total loss of their equity.  (By the way, this is illegal in California, but it happens quite often.) 

Refinance your mortgage - only those with equity will qualify

Please note, refinancing your mortgage will only occur if there is significant equity in the property as the property is used for collateral on the loan.  If you owe more than your property is worth, the best option would be to obtain a short sale rather than attempt to obtain a mortgage refinance to prevent foreclosure.