Government mortgage help Programs

The government's Home Affordable Modification Program can save homeowners money each month.

The number of U.S. foreclosure filings hit a record 2.8 million in 2009, according to RealtyTrac. Fortunately several programs offered through the federal government have been created to help homeowners who are struggling to pay their mortgage loans each month. By working with these programs, homeowners can reduce the size of their monthly payments. Homeowners do have to meet certain eligibility requirements to participate in these mortgage hardship programs.

Home Affordable Modification Program

The government's Home Affordable Modification Program rewards banks and mortgage lenders who take steps to reduce the monthly mortgage payments of homeowners who have suffered financial hardships and are in danger of defaulting on their loans or losing their homes to foreclosure. Lenders have several options for reducing these payments. They can turn 15-year fixed-rate mortgage loans into 30-year loans, creating smaller monthly payments in the process. They can reduce the interest rates attached to the loans of financially strapped homeowners. They can even reduce the principal balance of mortgage loans. All of these options will reduce homeowners' monthly payments. To qualify for a loan modification through the program, homeowners have to first contact the servicer of their loan. Private lenders handle these mortgage modifications, not the government. Homeowners must have mortgage loans of no more than $729, 750 to qualify for the program. Their monthly mortgage payment must also be more than 31 percent of their gross monthly income.

Home Affordable Refinance Program

Many homeowners would be able to afford their monthly mortgage payments if they could refinance their loan to one with a lower interest rate. Unfortunately, because home values have fallen since the housing crash of late 2006, many homeowners no longer have enough equity in their homes to qualify for a refinance. According to First American CoreLogic, about 24 percent of homeowners at the end of the first quarter of 2010 owed more on their mortgage loans than what their homes were worth. The federal government's Home Affordable Refinance Program provides relief to some of these homeowners. Under the program, lenders receive financial incentives for refinancing the mortgage loans of homeowners with mortgage loans worth as much as 125 percent of their home's value. To qualify for the program, homeowners must have a loan owned or guaranteed by Fannie Mae or Freddie Mac and be current on their mortgage payments. To apply for this program, borrowers must contact their current mortgage servicers.

Second Lien Modification Program

Many homeowners have not just one mortgage loan, but two. Often it is this second mortgage loan that makes it difficult for struggling homeowners to make their mortgage payments each month. The government's Second Lien Modification Program addresses this. Under the program, lenders receive financial incentives to modify the second home loans of struggling homeowners. The goal is to lower these monthly payments. To qualify, homeowners must have a second mortgage loan with a principal balance of at least $5, 000. The second loan must also require a monthly payment of more than $100. Homeowners must first modify their primary mortgage through the Home Affordable Modification Program before applying for a modification of their second mortgage.