Will that happen this time around? Only time will tell. But with the current loan modification options, the odds are certainly stacked in our favor.

Many hard working Americans watched, almost helplessly, as their savings began to dwindle last year. Many were forced to cash in 401k plans meant for retirement while others dusted off their resumes after corporate cutbacks and found themselves pounding the pavement looking to start their careers and their savings accounts all over again.

But help came in a big way as the government stepped in with numerous loan modification programs to help the nation save their homes in the midst of this financial crisis.

Now that the biggest wave of company closures, layoffs, and cutbacks are over, let’s take a realistic look at what our options are for “getting back on track.”

Loan Modification – A Way to Save Your Home

With the help of a qualified loan modification counselor, you can turn a financial mess into a brand new start by 2010.

President Obama’s ambitious mortgage stimulus plan is geared toward Americans who are at risk of losing their home to mortgage default or foreclosure. How does this work?

1. Making Monthly Payments Affordable

The main goal of the stimulus program is based on adjusting mortgage payments to make them realistically affordable according to the homeowner’s current income. The fact that an individual’s home has lost value or that they are upside down becomes a secondary issue. The stimulus program is based on the acknowledgment of a financial crisis. Do we want a good portion of Americans to lose their homes? Absolutely not.

2. Keeping Monthly  Mortgage Payments Low

In order to standardize what an affordable monthly mortgage payment is, mortgage lenders who are helping homeowners are adjusting payments so they will not exceed 31% of a family’s gross monthly income. There are many ways to achieve this goal, which can include lowering interest rates, extending the length of the loan, and more.

For full details on requirements for your particular state, contact a qualified mortgage loan modification consultant for your area.

3. Cash Incentives

Banks and mortgage lenders participating in the programs to help homeowners receive money from the government for every homeowner they assist. These incentives continue for up to five years, as long as the homeowner is able to make their agreed payments. This incentive plan encourages banks to realistically assess the homeowner’s financial situation and do everything possible to ensure that the rates and mortgage modification plan is feasible.

These cash incentives are not limited to the lender. The homeowner will also receive up to $1000 each year (for up to five years) for making their payments on time.

With all of these plans in place, it is very likely that one of them is right for your current situation. The sooner you call a mortgage modification consultant, the sooner you can have the stress of losing your home off of your plate and move on to a new year and a new beginning. Regardless of your level of financial hardship, call today, and begin your journey to recession recovery. You may come out even better than you were in the first place.

Since that time, the Federal Trade Commission has stepped in, working tirelessly to shut down these businesses.

After that first wave of chaos, what remains for those who still find themselves struggling to hold on to their property? Should individuals attempt to ‘go it alone’ with their current lender to try to work out a modification plan that will keep them in their homes?

The answer to that question can be tricky. While there are certain individuals who may be comfortable with real estate laws and familiar with the recent changes to loan modification programs, that scenario is certainly few and far between.

So, what’s a homeowner in need of loan modification assistance to do? Here are several tips that will help you steer clear of the scams and give you a quick summary of what’s available to you.

The Red Flags

After listening to countless stories from individuals who were taken advantage of, here is the common thread that can quickly alert you of a fraudulent company:

• Fraudulent loan modification companies are not licensed practicing attorneys or members of the State Bar, so they really have nothing to lose. They’ve set up shop on completely false pretenses. Checking credentials is the first step to a smart choice.

• Up-front fees. Large up-front fees have ranged anywhere from $500 to well over $3,500, just to get the paperwork started. Use common sense. Everyone is in business to make money and support their own families, but paying large sums of money before any work has even begun is a huge red flag.

• Telemarketing type calls. There have been numerous reports of telemarketing pools cold-calling potential clients. They find the names of individuals in pre-foreclosure and repeatedly call, making promises of reduced payments and saving your home.  Many, in desperate situations, afraid of losing their home have fallen for these scams. The truth is that no one can promise to lower your payments before all of your income information has been presented and your mortgage lender has been contacted. Any company making these blanket promises should be avoided.

As with any type of purchase or financial decision, caution and common sense should be used. There are shady used car salesmen and there are dishonest, self-proclaimed loan modification “experts.” But don’t allow a fear of fraudulent companies keep you away from the government programs and loan modifications that are available to you.

The Real Deal

Now is the best time to obtain representation and work out a plan of action with a legitimate loan modification company. The Making Home Affordable Program, part of the Obama Administration’s strategy to get the economy and the housing market back on track offers refinancing through the Home Affordable Refinance Program (HARP), and there are numerous mortgage modification scenarios available through the Home Affordable Modification Program (HAMP).

Each program has state specific qualifications and rules, which include income, time of home purchase, total home price, etc. By acting now, you can benefit from a reduced interest rate, an extended loan period, debt forgiveness, or a combination of these and other loan modification methods.

The Home Affordable Modification Program continues to help homeowners in need.

Unlike previous “bailouts” aimed at offering relief to large banking institutions, this one directly targets homeowners (or what the media has dubbed “Main Street”).

At the core of the economy’s struggles is the housing downturn. Millions of people have faced foreclosure and there are millions still to come. In order to stabilize the market, the Obama Administration introduced their Making Home Affordable Plan and backed it up with $75 billion in funding. All told, they expect to assist 3-4 million homeowners with modifications and another 3-4 million with a refinance program.

Incentivising the Banks to Modify

Loan modifications were being done before the government got involved, but the banks needed extra incentive to pick up production. With the government’s money, the banks are now more willing to approve a modification that they may have otherwise denied.

The program has been an evolutionary process as government officials and lenders continue to tweak it to maximize results. Already, some incredible results with this program have been seen, so it is working as reports show hundreds of thousands of people have already been helped.

What happens when you are approved on the Home Affordable Modification Program?

The plan is streamlined and follows a basic guideline. Every borrower that qualifies will have to make three consecutive on-time payments for the modified amount. This is traditionally called a “stip-to-mod.” If the homeowner meets this criteria, the modification becomes permanent. Ultimately, a homeowner can expect a modified mortgage payment somewhere between 31 and 38 percent of their monthly gross income. The lender is required to offer a payment no more than 38% for qualified clients. The government then kicks in additional money to lower the payment to as little as 31% of monthly gross income.

Additionally, there are cash incentives for both the homeowner and lender. Lenders are eligible to receive up to $4,000 over a three year period while clients can get up to $5,000 reduced from their principal balance over a five year period.

• Loan modifications accounted for 47 percent of all completed foreclosure prevention actions in May 2009.
• Completed short sales saw an uptick of 3 percent to 3,700 in May. This is three times the reported volume a year earlier.
• Delinquency continued to shoot up. An additional 80,100 went 60 days late or more in May. That was a 7 percent increase in and brings the number to over 1.3 million.
• Income loss continues to be the number one cause of delinquency as it grew from 34 percent to 40 percent in May.

Many of the numbers for the program are trending down. Completed repayment plans dropped as did completed loan modifications. It is explained by the report that the falling numbers are due to the fact the program was discontinued and resources had been shifted to the newer Home Affordable Modification Program that is apart of the Making Home Affordable plan.

Completed loan modifications declined for the second straight month.

Example of a Success Case with the Making Home Affordable Plan

The client started with a monthly payment of $2724.43 per month. After a successful negotiation with Countrywide/B of A, the homeowner’s monthly payment dropped to $1931.61, A SAVINGS OF $810.82. We say it all the time, but this is literally the difference between ultimately getting foreclosed on and keeping your home.