Try mortgage modification to cut payment

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Dear Dr. Don,
I’m behind on my mortgage by around one payment. I’m having difficulty keeping up. Is there a program out there that can help? I tried talking to my bank, but I’m not sure about mortgage modification. I am not in any foreclosure period yet, but I would like to avoid that and try to keep my home. Do you have any advice for me?
— Jay Jericho

Dear Jay,
The federal government’s Making Home Affordable initiative has a Home Affordable Modification Program, or HAMP. The website lays out the eligibility requirements for mortgage modification. One of the requirements is that you are current on your mortgage payments, with “current” defined as not being more than 30 days late on your mortgage payment in the last 12 months.

Here are the other eligibility requirements:

  • You occupy the house as your primary residence.
  • You obtained your mortgage on or before Jan. 1, 2009.
  • You have a mortgage payment that is more than 31 percent of your monthly gross (pretax) income.
  • You owe no more than $729,750 on your home.
  • You have a financial hardship and are either delinquent or in danger of falling behind.
  • You have sufficient, documented income to support the modified payment.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

If HAMP won’t work for you, you must find another way to get your monthly budget to balance. Analyze why you’re coming up short in making your mortgage payment. Bankrate’s budgeting calculator can help you lay out your monthly expenses.

If you can’t find a way to stay current on your mortgage, you need to get out from under that mortgage. You haven’t discussed your home’s value or the mortgage loan balance, so it’s not clear whether refinancing or the sale of the home makes sense in your situation. I know you want to keep the house, but if you can’t keep up on the payments, this won’t be possible.

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