If you have missed some payments on your mortgage and are now risking a default on your loan, the government has come up with two possible plans to help. One of these is called Mortgage Loan Modification!

Here are the current qualifications expected to pass congress:

• Your primary mortgage (1st mortgage) must be less that $729,500
• The mortgage must have been signed and completed before January 1, 2009
• You must live in the mortgaged house
• You can verify your income with tax returns and pay stubs
• You must have a financial hardship letter in your own handwriting and signed by you
• If your household debts are more than 55% of your income, you must agree to go for credit counseling

Some things the bank can offer under this plan:

• The bank can lower your monthly payment to about 31% of your gross monthly income.
• The interest rate can go as low as 2%, but will more likely be in the 4½% range.
• The homeowner does not pay any fees for the modification. This is paid by the government to the servicer
• The bank could possibly set up a balloon payment at the end of the mortgage if the payments are too low
• A balloon payment would have to paid off if the mortgage is paid off or refinanced or the property is sold
• There is an incentive plan in the program. If you make the payment on time, the government will gradually reduce the principal balance for 5 years, with a maximum reduction of $5,000
• The rate can be adjusted up after 5 years. This lower rate is to help you dig out of a hole, it is not permanent
• You can only have one modification, there is no bargaining at a later date.

If you are current on your mortgage payments and your bank will not let you modify your present mortgage because the property is now worth less than the current principal balance, you may qualify for the refinancing program from the government. This is being referred to as the Refinancing Option.

Here are some of these requirements

• This must be your primary residence
• You must have enough income to support the new mortgage debt
• You cannot take cash out with the new loan to pay other debt
• Your loan must be owned by Freddie Mac or Fannie Mae
• The interest rate will be based on market rates and there can be additional points and fees charged
• The mortgage will be for either 30 or 15 years and will have a fixed interest rate
• The bank can offer lower interest payments in the first 5 years of the new mortgage

If your house appraisal falls too low, the government plan will not help at all. The current maximum is 105% of the mortgage balance. So, if your house appraisal is now $300,000 the maximum your principle balance can be is $315,000.