If you're behind on your mortgage and facing foreclosure, you need to cut a deal with your lender.

We can tell you what to do, what to ask for and what to expect.

Start by calling the customer service number, explain that you're having financial problems and would like to speak with someone about restructuring your loan.

Virtually every bank and mortgage service company -- that's a firm that sends out bills and collects payments for the investors who own your loan -- has a loss mitigation department that does nothing but work with borrowers in trouble.

We've heard horror stories about how difficult lenders make it to reach a loss mitigation specialist. Some customer service reps will even tell you they don't have such a department. But that's only because it's called something else, so ask if they have a workout department, loan modification department or reinstatement department.

"It's a nightmare," Donna Watkins, a certified credit and housing counselor at Triangle Family Financial Services told the Raleigh (N.C.) News & Observer. "We get transferred repeatedly and put on hold for long lengths of time. And they even hang up on us.

"The problem is getting to the person who has the power to do something."

When you do, you'll be asked to fill out forms about your finances, including how much you make and how much you owe. Be completely honest. Keep the lines of communication open. If you stop talking, or start tinkering with the truth, your options will disappear quickly.

Tell the service rep you want a mortgage modification. That's where the lender agrees to change the terms of your mortgage to allow you to make smaller monthly payments.

It can do that by extending the term of the loan, adding missed payments to the balance or turning a rapidly rising adjustable-rate mortgage into a more manageable fixed-rate loan. Sometimes it's possible to use a combination of the above.

It's important to stay in your home while you wait for an answer, because you may not be eligible for assistance if you do not live in the property.

The lender will use that information to make a critical decision: Do you have the wherewithal to work your way through your financial crisis and resume making your mortgage payments?

If it concludes you do, and you're very lucky, it will come back with a modification plan.

If you're a little less lucky, it will offer one of these more costly alternatives to save your home:

• Forbearance: This allows you to make partial or no payments at all for a few months. You'll be expected to catch up later.
• Reinstatement: Reinstatement allows you to make up any missed payments in a lump sum and then continue paying your monthly obligation as before.
• Revised repayment plan: The lender adds the missed payments to future payments on a prorated basis, plus interest. These increased payments can be paid back over a period of time until you are current.

Unfortunately, far more borrowers are turned down than offered a restructuring plan. There seems to be two major reasons for that.

The first is that hundreds of thousands of homeowners were loaned far more money than they could possibly repay -- one of the more astonishing aspects of the current mortgage crisis.

Writing off part of your debt to lower your payments is not an option the great majority of lenders will consider. They'll recoup more of their money by foreclosing.

The second problem is that there's precious little evidence banks and mortgage companies are doing as much as they claim to rescue struggling homeowners.

The most recent independent study by the Center for Responsible Lending, a nonprofit research group in Washington, D.C., found lenders are seven times more likely to foreclose than modify a loan.

If you can't get your loan restructured, it's time to ask for a short sale. That allows you to sell the house for less than you owe on the mortgage with the lender agreeing to write off the difference.

Lenders are willing to accept that if they'll lose less money than following through with a foreclosure, which costs an average of $50,000, according to the Mortgage Bankers Association.

(A deed in lieu of payment is another, less widely used option, in which the lender agrees to write off your debt in exchange for title to the home.)

Borrowers who have suffered a personal hardship, such as a life-threatening illness that makes it impossible to work or the death of a spouse, are most likely to win approval.

Don't be surprised if it takes weeks, or even months, for the bank to get back to you.

If you win approval, make sure the agreement clearly states the proceeds of the sale will be payment in full "without pursuit of any deficiency judgment."

Without that clause, the bank could let you sell at a loss and then seek a deficiency judgment that requires you to pay the difference between the loan balance and the sale price.

A short sale may not be what you were hoping for, because you will lose your home.

But it's better than suffering through a foreclosure.

Your credit score would drop 80 to 100 points instead of the 250 to 280 points from a foreclosure. And, after 18 months, you can get a reasonable interest rate from a lender for another home purchase instead of the 36 months you'd have to wait after a foreclosure.

By Bonnie Biafore

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com.