Help From the Government

• The federal government in 2009 launched its Home Affordable Modification Program, which provides financial incentives to lenders and banks to encourage them to modify the loans of homeowners who are struggling to make their payments.
  
  Under the program, lenders have several options: They can reduce the principal balance on your mortgage loan, reduce the loan's interest rate or restructure the terms of the loan. Each option will drop your monthly mortgage payment.
  
  To participate in the program, call your mortgage lender. The majority of lenders and banks are taking part in the government program.
  
  

To Qualify

• You do have to meet several requirements to qualify for a loan modification under the Home Affordable Modification Program. First, your home must serve as your primary residence. You can't modify a loan on a second or vacation home.
  
  Secondly, the amount you owe on your first mortgage must be equal to or less than $729,750, and you must have taken out this loan on or before Jan. 1, 2009.
  
  Finally, the payment on your first mortgage--which includes principal, interest, taxes and insurance--must be higher than 31 percent of your gross monthly income.
  
  If you meet all of these requirements, call your mortgage lender or bank to ask about a loan modification. Though the government is running the Home Affordable Modification Program, it is not modifying any loans directly; lenders and banks are handling that work.
  
  

If Your Lender Isn't Participating

• Though the majority--more than 70 percent--of lenders and banks are participating in the Home Affordable Modification Program, some are not. But you can still qualify for a loan modification as a way to stop foreclosure even if your lender or bank is one of these nonparticipants.
  
  Call your lender or bank and tell a loan officer that you are struggling to pay your mortgage bills. Tell the lender why this is. Maybe you lost your job, have seen your annual income plummet or are suffering through a serious illness or injury that has kept you from working.
  
  Tell the loan officer that if your loan is not modified to have a lower monthly payment, you might have to stop making payments and fall into foreclosure. It is in your lender's or bank's best interest to keep you in your home and making mortgage payments, even if they are smaller than they were before.