And, contrary to popular belief, you don't need to be in default on your mortgage either. What you DO need is a hardship that is not your fault (and you can prove it), and enough income to make a modified mortgage payment. If you qualify for the Home Affordable Modification Program, you should apply -- it's like a free refinance and your interest rate could drop to as low as 2%.

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This Is HAMP Help

Here's what you need to be eligible to apply for a trial mortgage modification:

  • The home must be your primary residence;
  • Your mortgage is less than or equal to $729,750;
  • You must have obtained your mortgage before January 1, 2009;
  • Your housing expense, including principal, interest, property taxes, HOA dues, and insurance, must exceed 31% of your gross monthly income;
  • Stable and sufficient income to make a modified payment (even unemployment compensation can be counted); and
  • Here's the biggie -- you need to PROVE that you have a hardship -- either a mondo reduction in income or ginormous increase in expenses that was beyond your control (not the result of buying a stupid RV or boat).

If you are eligible, call your lender and start your paperwork. You'll have come up with a lot of paperwork -- income, debts, asset documentation, and write a hardship letter before you may be granted a trial modification and hopefully a permanent one. The average homeowner in the program has saved about $500 a month, so if you qualify, get the lead out and call your loan servicer.