The federally funded program “Keep your Home California” has already saved numerous homeowners in default, from loosing their home. $772 millions out of the $1,9 billion are now being allocated to help about 9,000 borrowers in California reduce their principal balance. Often criticized in the past, loan modification have now become a powerful tool to help struggling homeowners.

The principal reduction can be of up to $100,000 on Fannie Mae and Freddie Mac loans. The Other lenders review each homeowners situation independently without standardized guidelines. A homeowner that I was helping, and whose property was highly under water, has recently obtained a principal reduction of 177,000 over a 3 years period of time as long as the loan monthly payments were made in time.

There isn't a rule of thumb that can tell you, how advantageous a loan modification will be. Lenders set different guidelines by offering "in house" loan modification that are unique to each lender. As a homeowner you have very few clues to make prediction. You can verify if you are eligible, consult your lender and a third party like a Realtor CDPE (certified distressed property expert) who has gained experienced in solving individuals foreclosure crisis. Lenders for instance might not say out loud that the total debt of the borrowers including principal, interest,taxes and insurances on home loan should not exceed about 42% of the gross income and be higher than 31%. One think for sure, if you don’t try, you’ll never know and may miss an opportunity to lower your payments.