Loan Modification is another "voluntary" program designed to help homeowners facing foreclosure. A favorite of the media, this program seeks to change the terms of a mortgage, including a reduction in the interest rate (permanently and temporarily), an extension in the term of the loan, a reduction in the principal balance, or some combination of the three.

There are two ways a consumer can approach getting his or her mortgage modified. The first is to reach out to the lender directly, detailing the situation and waiting for the lender to offer a plan. The second is to employ a professional to handle the negotiations on his or her behalf. (See YOU Magazine September 2008).

The primary benefit to employing a professional to assist you with a modification is knowledge and experience. They know what they're doing. A loan modification company or consumer credit company is accustomed to working with lenders to obtain a successful modification. The key for you then is to work with someone skilled in obtaining the best modification for your needs. Be sure to get a referral from your real estate or mortgage professional, or at least someone you know who has successfully gone through the process themselves. Whatever you do, do not be afraid to ask for and check all references because, unfortunately, there are scammers out there looking to take advantage of desperate homeowners during this extremely vulnerable time in their lives.

This doesn't mean you won't pay for the services of a professional. The typical costs for employing a loan modification company could be in the range of $3,000 to $5,000 depending on your situation and if you employ a company to negotiate for you as well. Items that can impact the fee can be the number of loans you need modified and the company you select.

Choosing a consumer credit counseling company may not cost you anything, but the expertise of the people you work with and the outcome itself may not be equal to employing a company that is dedicated solely to mortgage modifications.

One key point to remember is that the lender, while often willing to work with you, always puts its own interests first. This means that, while the lender may be willing to work with you personally to avoid a more substantial loss on its part, the solution offered may not be the best possible scenario available to you. Keep in mind, with a loan modification, you are asking the lender to take a loss, and you can bet that the lender will always try its best to minimize these losses.

Whichever path you choose, timing is of the essence. If you're struggling to make your payments or you've already fallen behind a few months, this is not the time to bury your head in the sand. Communication is the key to your success. This means answering the phone calls and opening up the letters from lenders. It means getting on the phone and calling your lender's loss mitigation department and following any advice they offer.

Unfortunately, accurate statistics are not currently available on the success rate of homeowner-negotiated transactions versus those who utilized the services of paid professionals. The best advice we can offer is to find out the right course of action for your individual needs. You've already taken the first step. You've read this article and you've learned the basic steps you need to take to save your home. Don't wait until it's too late.

For any questions about home financing, reach out to Legacy Mortgage and find out how you might be able to benefit from the recent events that are quickly changing, for the better, the economic outlook of the months and years ahead.