Foreclosures are present at all stages of the market; from expensive homes to multimillion-dollar beachfront mansions, and most endangered properties are in the sub-$500,000 price range.

Residential real estate foreclosures are disrupting property values ​​as well as disrupting the financial well-being of families, neighborhoods, communities and municipalities. Foreclosures have accelerated not only because of a downturn in the economy that affected home sales, but also because many homeowners were talked into adjustable-rate mortgages that moved to higher payment levels that they couldn’t afford.

Personal bankruptcies and foreclosures are major influences on credit scores, but it is increasingly common for late payments due to job loss or reduced hours to affect credit scores as well. Many people took out home loans they didn’t understand and bought houses they couldn’t afford.

There has been a current trend of walk-a-ways, those families who leave their home before the foreclosure process is complete or decide to live in their house without making their mortgage payments until the banks finally foreclose which, depending on the state they live in, can take up to two years.

Homeowners facing financial difficulties should approach their mortgage lenders as soon as they think they might start to fall behind and see what options are available, including a loan modification.

Because foreclosures impose additional costs, including legal and administrative costs, as well as the costs of leaving the property vacant for a possibly prolonged period, both the borrower and the lender are often better off avoiding foreclosure.

Beware of the rise in foreclosures that has created predatory practices because “foreclosure bailout” has become a lucrative business venture for scammers. There is no quick fix, and often a homeowner finds himself in a daunting financial mess with few options. Even mortgage modifications take time and many are never approved.

What’s worse is that homeowners who get approved only find out that they still end up in default months later because they bought a house they couldn’t afford.

In the event of a foreclosure, there may be tax issues as the lender will report the foreclosure to the Internal Revenue Service and you will be issued a 1099 A, 1099 S, or both. Depending on the tax rules in effect at the time of the foreclosure, the taxpayer may owe taxes on part of the outstanding balance of the mortgage.

Congress passed a bill in 2007 to exempt taxpayers from having to pay taxes on personal residence defaults up to and including 2010. Check with your tax advisor to see if there has been any additional relief to this tax rule.