Depending upon your lender and the programs they're involved in, a drop in your income or a rise in your house payment might qualify you for a mortgage loan modification.

If you're struggling to meet your mortgage payment every month, consider calling your lender to see if they can offer help. You may be able to get a refinance with more favorable terms, or you may be eligible for a straight modification.

If your loan is backed by Fannie Mae - and many are - you could qualify for the Homeowner Affordability and Stability Plan. In fact, Fannie Mae and three 3rd party vendors are right now looking at the loans in their portfolio to see who is eligible.

If you are, you'll get a letter from them, so watch your mail.

You do risk being overlooked if the reason for your struggle is a drop in income - because they'll base their research on the financial information in their files. They'll see it and know it if your payment has doubled - but unless you tell them, they won't know your income has dropped. They're looking for mortgage payments that exceed 31% of a consumer's income.

Thus, you need to call. But first consider the consequences. If you expect your income to rise again within a couple of months, this could be an unwise move, because your current income will become public knowledge and it could affect your ability to borrow from other sources. It could also affect the interest rate and credit limit on credit cards you now carry. You know, if they think your funds are low, they'll act to grab all they can before you quit paying!

So think it over before you act.

Some time within the next couple of months, homeowners whose loans are backed by Fannie Mae can expect to get a letter regarding their eligibility.

Once approved, homeowners will be subject to a 3-month "probationary period" during which they must keep their payments up to date. Only then will the loan modification be finalized.

The program is set to run for 5 years, after which time the terms will revert to the terms (and payment) the loan carried at the time of the modification. However, participants are required to sign a 4506 T form - authorizing the lender to access their IRS returns. If those returns show a dramatic increase in income, terms will revert to pre-modification status.

Loan Mods will have a negative impact on your credit scores. Deviating from the original terms of your mortgage and skipping payments will be reported to the the three major credit bureaus. Give it some thought before you resort to modifying your loan.

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