I've actually run across people how haven't made a morgage payment in 4 YEARS !! How do they avoid forclosure? Equity. They have lots of equity that the bank is after.

When you bought your house, you borrowed the money from a bank, or mortgage company, and they borrowed the money from the Fed so they could loan it to you. Today they can borrow at 2% and lend at 6%. That gives them 4% to cover all their operating costs and profits. When you first bought your house; they made a lot of money every month.

Now let's assume you had the house for many years and only owe $10,000 on your mortgage. If the house is worth $100,000. That means you have $90,000 of equity in the house. But it also means they're only making 4% on $10,000. With infaltion raising their expenses over the years, your loan is almost more trouble to them than they care for. They would rather have you pay it off and be done with it.

But, if you can't make the payments; your loan is going to cost them 2% on $10,000. That's $200 ... a year! or $16.67 a month. They can afford that. So they decide to pay the $16.67 a month and wait for you to start making payments again.

In the mean time, your interest rate is still 6%. And they add any missed interest back onto your balance. At the end of 1 year of missed payments. You'll owe $10,616.78. Plus late fees. Let's say it all adds up to $12,000.00

The next year, they get to charge you interest on last years unpaid interest ... and late fees. Now you owe $14,123

Your balance has changed $4,123 and it only cost them $400. ($200 each year)

At the end of 5 years of missed payments, you'll owe $21,312 and it will have cost them $1,000 ($200 each year)

At the end of 10 years of missed payments, you'll owe $36,570 and it will have cost them $2,000 ($200 each year)

At the end of 20 years of missed payments, you'll owe $84,912 and it will have cost them $4,000 ($200 each year)

Basically at this point, they'll forclose and sell your house for $84,000. They'll get to keep $74,000 ($84,000 - $10,000 that they still owe to the Fed) They'll make $74,000 on a $4,000 investment. When you take into account the fact that they invested the $4,000 by making $16.67 payments every month, they got a whopping 22% return on their $16.67 monthly payments. That's why they'll wait until all your equity is used up.

If you don't have any equity when you start to miss payments; then they can't sell the house for more than ... THEY owe. If this is the case, they'll forclose immediately to limit their loss.

You have to remember; they're in business to make money. If you have equity, they'll be glad to let you stay ... until its all used up.

If you're missing payments and have a lot of equity. Better start making payments ... or sell while you can still keep some of your own equity.