As the U.S. economy continues to struggle, more and more Americans are facing financial difficulty paying their mortgage.  Fortunately for them, there is a way to gain some relief.  Loan Modification is a method that is gaining popularity as a way to save your home from foreclosure.

Loan modification is when a borrower seeks a change in terms for an existing mortgage, which effectively decreases the monthly note.  The modified loan will either have a new interest rate or longer terms.

Are you eligible for loan modification?

The Department of Treasury states, ““Anyone with high combined mortgage debt compared to income or who is “underwater” (with a combined mortgage balance higher than the current market value of his house) may be eligible for a loan modification. This initiative will also include borrowers who show other indications of being at risk of default. Eligibility for the program will sunset at the end of three years.”

When applying for a loan modification, you should have all documents relating to your income and expenses.  For your income, this would include your last four pay stubs.  For your expenses, this should include copies of every monthly bill, food receipts, and medical bils.

When contacting your bank, be sure to ask for the loan mitigation department.  This is the only department that can help you with a loan modification.  If you are behind in payments, your call will likely be routed to a collections department.  The collections department has one job: get money from you.  You must bypass this department to discuss your modification.

Many homeowners are throwing up their hands in defeat and walking away from their mortgages.  Not only will you lose your home by doing so, you will also leave yourself with a terrible scar on your credit report.  Loan modification may be your alternative to losing your home and your credit.