Negotiating with your lender

NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke took to the podium yesterday, outlining the need for lenders to keep troubled borrowers in their home. Here's what it means to you and how to take action.

It's really going to vary from lender to lender. Every proposal that's out there, from freezing interest rates to reducing the principal on these loans, is all voluntary. So banks won't all have the same solutions.

Some experts we talked to said that lenders may be more sensitive today. "This problem is so widespread, lenders may have been resistant in the past," says Bob Moulton of Americana Mortgage. Today that's a different story.

"It's cheaper for a bank to renegotiate payments than to chase someone and miss out on monthly mortgage payments. "It's cheaper for them to take a loss," says Moulton.

The sooner you call your lender, the better chance you have of negotiating. Getting a loan modification is a time-consuming process.

So, before you miss that first payment, get on the phone to the company that services your loan. Then, collect all the info that can support your financial distress.

Collect info like your social security benefit statements, your pay stubs or unemployment statements, your tax return and a list of your household expenses.

Keep in mind that if you don't get in touch with your lender and you start missing payments, your creditor will try to get in touch with you by mail or phone. Keep detailed notes on who you talk to and what was agreed to.

Your lender may be able to reduce or suspend your payments for a certain amount of time. Your interest rate may be reduced or your adjustable rate may be frozen.

Sometimes you can extend the number of years you have to repay your loan. If your mortgage is insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current.

You may be allowed to wait several years before repaying this loan, according to the Department of Housing and Urban Development.

We can never advocate just sending your keys back to the lender. Not only will you be losing your home and violating a contract, but your credit score will suffer, destroying your ability to get credit in the future.

In fact, the foreclosure could stay on your credit score for 7 years. And that means high interest rates on everything from auto loans to credit cards.

But according to foreclosure attorney Mory Brenner, you can begin to repair the damage in two to four years.

But that's not the only consideration. You may be responsible for any deficiency on the home.

For example, if someone walked away for a $200,000 home, and at an auction the house was sold for $150,000, you will be on the hook for that $50,000.

And the lender can go after your assets like your savings accounts or other property you may own, according to Brenner.