One of the most important initiatives to help people through the foreclosure crisis is the new "Making Home Affordable" loan modification program. Under the plan, millions of borrowers are entitled to a loan modification, as long as they qualify for this special government assistance.

Possible government assistance from the so-called Making Home Affordable loan modification program has millions of people wondering whether or not they're entitled to mortgage aid. The answer is not always easy to figure out, but homeowners hoping for a loan modification should waste no time investigating the program guidelines. Those who qualify may see their mortgage interest rates or principal balances reduced.

Unfortunately, this potential government assistance takes time to unfold, and people who procrastinate could lose their homes before the Home Affordable help comes to the rescue.

Loan modification help

The Making Home Affordable rules state that, among other things, the mortgage that needs a loan modification must have originated on or before the first day of 2009, and only first mortgages are eligible. One of the biggest hurdles is that lender participation is voluntary, not mandatory, although government assistance to encourage banks and lenders to rework loans is available in the form of cash incentives.

People who owe significantly more money than their houses are worth won't qualify for a mortgage refinance, but they might still be eligible for loan modifications. The program is also restricted to people who live in their homes as a primary residence. The plan, which is essentially backed by taxpayer dollars, will not bail out real estate speculators. Most conventional Fannie Mae, Freddie Mac, and private lender mortgages can qualify, as well as most loans that have been packaged and resold as mortgage-backed securities. This means that subprimes and ARM loans are eligible for a Making Home Affordable modification if all the guidelines are met.

Mortgage refinance online help

Officials are doing their best to inform homeowners and speed up the process. Freddie Mac even offers an online "webinar" to explain government assistance options, which is very convenient for those who are Internet savvy. The session, lasting about two hours, is designed to explain the program and answer questions about eligibility.

Still hope for homeowners

There's also the Bush administration program known as Hope for Homeownership, which was signed into law as part of last fall's controversial economic stimulus package. Hope for Homeownership offers financial incentives for banks to provide loan modifications in lieu of foreclosure. Eligibility guidelines state that the mortgage debt-to-income ratio for the homeowner must be at least 31 percent, and applicants must show that they can't afford their loan, and didn't intentionally default on payments. Someone who qualifies for Hope for Homeowners can do a mortgage refinance for as much as $550,440, and shift into an FHA-insured 30-year fixed-rate loan with no prepayment penalties.

Published on May 3, 2009