Homeowners who have fallen behind on their mortgage payments or who are poised to do so in 2009 will find that mortgage lenders are more willing to try to keep them in their homes and avoid foreclosure than in previous years.  Lenders have learned a lot, but maybe not enough.  Major loan modification initiatives are underway at a number of the country’s biggest lenders:  Bank of America (and its Countrywide Financial unit), Citigroup and J.P. Morgan Chase, to name just a few prominent ones.

The FDIC, in its role as receiver of IndyMac Federal Bank, is vigorously and notoriously modifying mortgages of faltering borrowers in what they view as a lab experiment in avoiding foreclosures.  And there are programs at Fannie Mae, Freddie Mac, FHA and VA to help troubled borrowers.  One thing is true of all these efforts. 

If a troubled homeowner doesn’t seek out assistance from their lender or respond to them when they take the initiative in seeking out the homeowner, there isn’t much they can do to help! Generally, the point of contact is the loan servicer’s loss mitigation department.   Unfortunately, borrowers whose loans have been securitized and are owned by investors may not be eligible for a loan modification if the investor is maintaining a hard line about such programs, so help won’t be available.  While lenders have varying approaches to modifying loans, some of the options being employed include:  freezing or lowering the mortgage interest rate; extending the term of the loan from to 40 or even 50 years; recalculating the monthly payment based on a lower principal amount (without actually lowering the principal balance) and cutting the loan balance.