In your case, it sounds like you might qualify for help under what the U.S. Treasury Department is calling the "Home Affordable Modification Program." Under this program, mortgage lenders and servicers are being given incentives to agree to modify existing loans for borrowers having trouble making their monthly payments because of job losses or other circumstances.
A second program, "Home Affordable Refinance," is designed to allow millions of homeowners to refinance into lower-rate or fixed-rate mortgages. It is aimed at homeowners who are current on their monthly payments, but have not been able to refinance because their homes have declined in value in the recent real estate downturn.
This refinance program is aimed at homeowners whose mortgages are owned by either Fannie Mae or Freddie Mac. Be aware that many homeowners may not realize these agencies own their mortgages, and they should check with their loan servicers before concluding they are not eligible.
Borrowers who are delinquent on their mortgages will not be eligible for the refinancing program. Those in this situation should look to the Home Affordable Modification program.
But homeowners who are current on their mortgage payments also can participate in the loan modification program if they are in danger of falling behind. Borrowers should not wait until they are late in making payments before seeking help under this program.
The Home Affordable Modification program aims to help homeowners by lowering monthly payments by first reducing the interest rate on loans to bring payments down to the point where they are equal to 31 percent of income. To reach that 31-percent-of-income level, interest rates on existing loans could be cut to as low as 2 percent. If that 31 percent target is not met with a 2 percent interest rate, then lenders will extend payment periods to up to 40 years. Final options could include allowing a portion of principal to be repaid with no interest accumulation and an outright reduction in the principal amount owed.
In all three cases above, there are two telephone numbers I would call repeatedly. The first is to your mortgage servicer to find out about their participation in the Home Affordable Modification program.
According to the Treasury Department, participating lenders will not be receiving contracts to participate in the program until April, so it may take some time -- and more than one telephone call -- to find out what your lender is doing.
In the meantime, many lenders have agreed to delay foreclosures on all loans that meet the minimum criteria for the modification program, according to the Treasury Department.
Also, the Treasury Department is promising to post online lists of participating lenders as they sign up.
The second telephone call should go to a housing hotline operated by HUD, the U.S. Department of Housing and Urban Development. The number is (888) 995-4673. Hotline staffers will most likely put you in touch with a HUD-approved housing counselor who is supposed to help you explore all options at no cost.
HUD and the Treasury Department are warning that in no case should a homeowner seeking help with a loan modification or counseling pay for that help.
"Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan," the Treasury Department advises. "Do not pay -- walk away!"