Contacting Your Servicer

• If you are struggling to make your monthly payments -- and you might have several reasons for this, ranging from a job loss to a disability -- contact your mortgage servicer immediately. You can find the number for this company on your most recent mortgage bill. Ask to speak to an account executive. Once you reach such a person, explain that you are struggling to make your mortgage payments on time and that you need a mortgage modification to lower your monthly mortgage bill.
  
  

The Modification Process

• Under a mortgage modification, your lender will work with you to rework your mortgage loan so that your payment drops each month. Your lender has several options for doing this. It can forgive a portion of your mortgage loan's principal balance. This reduces the amount of money you owe on your loan, dropping your monthly payment in the process. Your lender can also rework the terms of your mortgage loan. If you have a 15-year fixed-rate mortgage with a high monthly payment, your lender can rework your loan so that it becomes instead a 30-year fixed-rate loan. Because you'll have longer to pay off your loan, your monthly payments will drop. Finally, your lender can reduce the interest rate of your loan. This, too, will send your monthly payment falling.
  
  

Working with the Government

• The federal government has been encouraging mortgage modifications since 2009, when it launched its Home Affordable Modification Program. Under this program, lenders earn financial bonuses from the government for every mortgage loan that they modify. Fortunately, most mortgage lenders across the country are participating in this program, something that can increase your chances of earning a loan modification. When you call your mortgage servicer, make sure to ask if it is participating in the federal government's program.
  
  

Short Sale

• If your lender can't approve your request for a mortgage modification, it might instead allow you to sell your home through a short sale. Under this type of sale, your lender agrees to accept less than what you owe on your mortgage loan when you sell your house. The advantage of a short sale is that you can sell your house more quickly because you'll be able to offer it for a lower price. There are two key disadvantages: First, you'll have to move out of your home. Second, if the buyers' offer is too low, your bank does not have to accept it, even in a short sale.