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When it was announced in early 2009, the government’s Home Affordable Modification Program, or HAMP, sounded simple: Troubled homeowners could modify their mortgage terms to reduce payments, making it easier to avoid default and foreclosure.

But HAMP has been a disappointment, serving only a fraction of the millions of homeowners originally thought to be eligible. Nonetheless it is slowly chugging along, and homeowners with enough savvy, organization and persistence can make it work if they keep five tips in mind, says HSH Associates, the mortgage-information firm.

“While getting a loan modification is far from a sure thing, knowing these five tricks can help you maximize your chances of successfully navigating the process (or at the very least, adjust your expectations to reality)," HSH says.

Know the odds

The odds of qualifying for the program are not good. Many people do not succeed in getting their loans modified, and of those who do, more than half fall behind in their new payments anyway.

For lenders other than Fannie Mae (Stock Quote: FNM) and Freddie Mac (Stock Quote: FRE) participation is voluntary, and many have taken different approaches to the problem.

Document every step

Many borrowers tell horror stories about lenders who are hard to get hold of and lose documents. HSH suggests that homeowners expect this from the outset, plan to be patient, and keep records of all communications and copies of all documents sent.

Keep a file and, before being asked, add new documents that could be relevant to your modification, such as bank statements. When you send documents, order a “return receipt” so you can prove they were received. Call the lender every week to check your status, and keep notes on the conversation, making sure to get the name of everyone you talk to, as it could be someone different each time.

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Obviously, if you make it to the trial period, when you make the modified payment, it’s important to make all your payments on time.

Check the rules

From time to time, the modification program undergoes modifications of its own, and the lender’s representatives you speak with may not always be up to date. Guidelines are updated on the HAMP website.

For instance, your retirement assets such as IRAs and 401(k)s are not to be counted toward your ability to make loan payments, but many lenders’ employees think they can be, HSH says.


If you’re turned down, try again. “For example, if you are denied a modification because you have at least three months' of mortgage payments in the bank, you can reapply once you no longer have it,” HSH says.

Stay positive

It may be maddening to deal with people who don’t return calls, lose documents and give conflicting information when you do get a hold of them. But the payoff can be significant. The government reported that in the second quarter of 2010, the average modification reduced the borrower’s monthly payment by $608. For many people, that’s enough to make the difference between keeping a home and losing it to foreclosure.

So, how much can you save? HAMP is designed to reduce your payment for principal, interest, homeowner’s association dues, taxes and insurance to no more than 31% of your gross monthly income. If you’re currently paying more than that, you could save the difference.

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