Foreclosure prevention is a messy business — more art than science. Here, an inside look at why some people get a loan workout and others don’t.

By Les Christie, CNNMoney.com staff writer
June 5, 2008

NEW YORK (CNNMoney.com) — More than 3,000 times daily, struggling homeowners call the foreclosure Help Hotline for advice on how to save their homes.

And so begins the complicated and time-consuming foreclosure prevention process. Working together are mortgage servicers - the companies that manage the loans - and the borrowers, with foreclosure prevention counselors often acting as go-betweens.

“The common objective is to fix the loan,” said Alan Goldberg, vice president with the home owner assistance division of Genworth Financial, a mortgage insurer that has collaborated with servicers in completing more than 2,800 workouts in the first quarter of 2008.

But what’s best for a borrower isn’t always best for the lenders, who weigh the cost of every workout against the cost of foreclosure. Whether or not a homeowner gets help boils down to the numbers.

If keeping an at-risk borrower in their home is going to cost the lender more than a foreclosure will, that homeowner is usually out of luck. The good news is that foreclosures are expensive - at least $50,000 according to the Center for Responsible Lending.

Servicers request details about a borrower’s income, as well as what the family spends on food, clothing, car payments, credit card debt, and student loans, according to Cleveland-based foreclosure prevention counselor Mark Seifert. Homeowners have to submit copies of pay stubs, bank statements, and utility bills to back up their claims.

“Servicers are also asking for things like hardship letters stating what the emergency was that caused them to miss payments,” Seifert said.

To stay in their home, borrowers almost always have to cut back on other expenses.

“We’ll tell someone they have to get rid of that $600 SUV payment if they want a workout,” said Wesley Justice, a vice president for loss management for AIG United Guaranty, a mortgage insurer.

Counselors often suggest homeowners cancel extras like cell phones and cable television, and stop eating out.