Mortgage Reduction Program

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If you're struggling to make your mortgage loan payment each month, you can seek help from the federal government's mortgage reduction program. These programs, collected under the government's Making Home Affordable Program, provide financial incentives to mortgage lenders and banks that work with struggling homeowners to reduce their monthly mortgage payments. Lenders can choose to reduce homeowners' mortgage loans as one way to lower these payments.

HAMP
The government's Home Affordable Modification Program, known by its acronym of "HAMP," provides financial bonuses to lenders who agree to lower the monthly mortgage payments of homeowners who are struggling to make these payments. Lenders have several options for lowering these payments: They can reduce the interest rate attached to homeowners' loans or restructure the terms of these loans. Or they can reduce the principal balance of the loans. Homeowners must meet several requirements to qualify for a mortgage modification. They must be applying for a modification for a mortgage loan on their primary residence, not a second or vacation home. They must have a mortgage loan for $729,750 or less, and must have taken out their mortgage loans before January 1 of 2009. Homeowners' monthly mortgage payment must be more than 31 percent of their gross monthly incomes.

2MP
Many homeowners have more than one mortgage. These second home loans can make homeowners' mortgage payments unaffordable, too, especially if these homeowners have suffered a reduction in annual income. The government's Second Lien Modification Program, known as 2MP, provides financial incentives to mortgage lenders who agree to modify the second home loans of struggling homeowners. To qualify for this program, homeowners must first have had their primary mortgage loans modified under HAMP. Homeowners' second mortgage loans must also have a principal balance of more than $5,000 and a monthly payment of more than $100 for borrowers to qualify for a 2MP modification.

Hardest Hit Funds
Starting in 2010 the government has provided funding to housing agencies in those states hit hardest by the economic downturn. A total of $700 million of this funding, through the government's Hardest Hit program, has gone to California and the California Housing Finance Authority. The authority's Keep Your Home program targets low- and moderate-income families who are struggling to stay in their homes. The program, like the federal one, encourages mortgage lenders to reduce homeowners' monthly payments, often through loan reductions, by providing them with financial incentives. To qualify for this program, homeowners must write a hardship letter that outlines why they are in need of assistance. Reasons can include a job loss, reduction in working hours and annual income or a serious illness that prevented homeowners from earning income.