If you're going to have difficulties making your mortgage payment because you've just lost your job, suffered a major illness or lost an income-generating spouse, don't wait until you're several months delinquent before taking any action.

There is help available and you don't have to lose your home. That's the message the Federal Reserve Board of Governors, JPMorgan Chase and the Utah Housing Coalition want to drive home as rising unemployment and declining home values threaten to aggravate foreclosure activity in Utah.

Loss mitigation, or efforts to keep homeowners in their homes, is taking on new significance as lenders including Chase devote more resources and trained personnel to prevent foreclosures -- one of several steps needed to help the housing market recover.

"We're trying to be proactive in Utah where home prices haven't plunged as much as in Nevada, California or Arizona. In those states, lenders are forced to write down values on homes. We're trying to get ahead of the curve before the foreclosure problem gets too big in Utah," said Ronald Branch, vice president of JPMorgan Chase Homeownership Preservation office in Houston. Nationwide, foreclosures cost lenders an average of between $40,000 and $45,000 each, he said.

Branch was addressing a group of Realtors concerned about rising numbers of short sales or pre-foreclosure sales in Utah at a workshop Tuesday in Provo. Both Branch and Jan Bontrager, a regional manager with the Federal Reserve Bank of San Francisco, were trying to get word out that foreclosures can be prevented under new federal guidelines to work out new loan terms with lenders.

Tuesday's workshop is part of efforts by the Utah Foreclosure Prevention Task Force and Hope Now, a private sector alliance of mortgage services, housing counselors and investors, to get struggling homeowners into mortgages they can afford.

Even though Utah isn't a hot spot for foreclosure filings compared with states such as California, Nevada and Arizona, there are signs that delinquencies or loan defaults by Utahns with good or prime credit histories are rising at a faster pace, Bontrager said.

And that's worrying, she said. The rise in prime delinquencies, while less severe than the one in the subprime market, poses a threat to the battered housing market in a recessionary environment.

Like subprime mortgages, many prime loans made in recent years allowed borrowers to pay less initially and face higher adjustable payments a few years later. As long as home prices were rising, these borrowers could refinance their loans or sell their properties to pay off their mortgages. But now, with prices falling and lenders clamping down, homeowners with solid credit are starting to come under the same financial stress as those with subprime credit.

According to the Mortgage Bankers Association, the delinquency rate on prime adjustable rate mortgages in Utah doubled to nearly 5 percent in the second quarter of 2008, up from 2.4 percent in the same period a year ago. The delinquency rate on subprime ARMs jumped to nearly 15 percent in the second quarter from 7.9 percent a year ago.

Scared homeowners

Not only do foreclosures hurt the value of surrounding homes in the neighborhood, they also hurt the credit rating of the homeowner, Branch said.

"The earlier you talk to a lender, the better. Don't wait until you're three months late on your housing payment and your credit rating is shot, and interest rates start to go up on your car loans, auto insurance and credit cards," he said.

But getting homeowners to get past their distrust of lenders, and fear of dealing with delinquent notices, and to take action immediately is a big challenge, Branch said.

"I've had a homeowner facing a trustee sale on her home the next day come to me for help. I asked her if she had received any notices from Chase, and she shows me six unopened envelops (default notices)," he said.

In another case, Chase recently sent letters to 1,200 homeowners in Sacramento who are delinquent on their payments for eight months to attend a foreclosure prevention workshop. Only 25 showed up, he said.

"Utah may be late to the foreclosure problem affecting many parts of the country. But it is not immune," Bontrager said. She cited data from the Bureau of Economic and Business Research at the University of Utah that found the number of foreclosures in Utah could jump to 13,000 by 2010 as more adjustable-rate mortgages are scheduled to reset at higher interest rates next year -- which would cause these borrowers' monthly payments to rise -- and many of them aren't expected to be able to qualify for new loans under now stringent lending standards.

In 2007, adjustable-rate mortgages made up about 70 percent of all subprime loans in Utah, compared with just 59 percent in the nation, Bontrager said, citing data from First American Loan Performance. Utah also trumps the nation in terms of the number of ARMs resetting in 2008 and in 2009.

How to keep your home

Some home retention solutions include special forbearance plans, which allow borrowers, who have been laid off, to suspend or reduce payments without penalty or late fees for a period of three to six months. Thereafter, the borrower will have to pay the remainder of the loan, Branch said.

Other solutions include loan modification, which target borrowers who have missed up to six payments and are facing foreclosure. This program aims to make payments more affordable by reducing the interest rate, deferring payment on part of the principal and extending the term of the loan to as long as 40 years.

Short refinance, or a lender-approved refinance of the property for less than what it is worth, is available but not popular among lenders, Branch said. "Would the lender want to keep taking write-down after write-downfi" he asked.

To obtain a short refinance, borrowers must satisfy additional liens on the property prior to closing, and show they have tried to refinance but failed due to declining home values and declining income.

To cope with rising numbers of short sales in a slow housing market, the Federal Housing Administration recently modified laws giving short-sellers up to 150 days to find qualified buyers. That's up from 90 days.

The short-seller may also be eligible for a $750 to $1,000 closing incentive which may be used towards paying liens, closing costs and other expenses.

"In a short sale, the foreclosure process may be placed on hold for 90 days to allow time for an offer to be made. But make sure you get that in writing from the lender," Branch said.