Big news for struggling homeowners who have been trying to get a HAMP loan modification – new guidelines are being reviewed due to a bill pending in Congress. The low numbers of completed loan mods has spurred the government to revamp the program guidelines in hopes of getting more permanent loan workouts completed.

Loan modification companies act as a mediator between lenders and borrowers, primarily focusing on mortgages.

Where the borrower is having difficulty in making payment based on the existing amounts and timescales, the company will work to either increase the term of the loan, or reduce the interest rate, or a combination of the two.

Changes were indeed necessary. Thus, the treasury department now requires banks to get two recent pay stubs before initiating any loan modification programs. In addition, homeowners are now required to give the I.R.S. permission to provide their most recent tax returns to these banks and servicers. This has obviously had an enormous effect since the number of applicants have dropped from 100,000 from the summer of 2009 to just under 30,000 in May 2010. The bottom line is that as more and more consumers drop out of these bailout programs, the larger this new wave of foreclosures will be. Not good news.

The program qualifications have just been too difficult for homeowners to qualify for and so the plan has not been as successful as originally hoped.

Most professionals say a homeowner will take a less severe hit on their credit report and will definitely help the home market prices for less than stellar neighborhoods. The White House has even provided a plan to give such homeowners who agree to short sales or voluntarily work with the banks and turn over their keys $3,000 for moving expenses. Another solution that has presented itself and although in its early stages is showing much promise and that is a principal reduction program with a few companies offering an initial free loan audit.

How much will it cost me? It depends on the company you use. Fees may be charged to the borrower or to the lender. Even if they are charged to the borrower, they should be fair and reasonable, and should only be charged on successful loan modification programs.

No organization; no oversight. This has led to the prevention of more families from stopping foreclosure and saving their most expensive investment… their home.

Harris Smith is a personal finance writer interested in home equity line of credit Don’t Miss Out!