Loan modification, deed in lieu, short sale, walk away, jingle mail, work-outs. You cannot turn on a TV, pick up a newspaper, or even walk down the street without hearing these terms. In this deluge of information it's becoming more and more difficult to know which services are legitimate, whether or not you should pay for these services, and what if anything is a fair price to pay for these services. Oh and did I mention there may be tax implications you have to consider.

So your behind or feel you will soon be behind in your mortgage payment, your interest rate has sharply risen, and you need to do something to ensure you can stay in your home. Even if in the long term you would prefer to sell your home and move on.

First off beware of scams. The California Department of Real Estate has a long list of individuals and companies served with "cease and desist" orders for engaging in improper loan modifications and/or foreclosure rescues.
As a general rule of thumb avoid anyone who wants you to sign over your property to them or pay upfront fees. It just isn't necessary. A good place to start is with HUD certified housing counselors. They either charge no or very low fees, have to be upfront about everything, and should be able to help you organize necessary documentation and explain the process. If any of these certified counselors are anything less than upfront let the Fraud Squad know so that the word may spread to other consumers.

If your thinking of getting help from an attorney, check and see if the attorney has been subject to any disciplinary actions and check with individuals and sources you trust to help you find out if the Attorney is someone you should be seeking help from. Then find out what the attorney's rates are for helping you with the loan modification and what work the attorney intends to perform for that rate. Since you can apply for a loan modification yourself think over whether having an attorney handling the issue is really in your interest at this point. There is no guarantee that even with the help of an attorney your loan will be modified, so find out upfront if the attorney will help with other pre-foreclosure options if the loan modification is not approved and what additional charges, if any, would apply.

Remember though no one cares more about your financial state than you and you can always try to get your own loan modification. The benefit of using a certified housing counselor or other service is the ability to have someone (hopefully with experience) help you go through the process and push through some of the delay tactics lenders might utilize. As much as you might want the problem to just go away and let someone else handle it you really should stay informed and make sure upfront that the person assisting you is going to keep you in the loop.

As for the process it will likely take months, not days, not weeks, but months. Despite this a lot of key decisions have to made (by you!) early on. Many of the decision you have to make depend on your circumstances and when you decide to pursue a loan modification. Are you only anticipating missing payments, but have so far kept your payments up? Are you behind on your mortgage payment but haven't been told by your lender that they are starting the foreclosure process? Have you received a notice of default? Have you received a notice of sale?

The answer to those questions will dictate not only the type of response you get from your lender, but the actions you need to take. For instance if you have already received a notice of sale then the first thing you need to do in discussing the modification is to get the lender to postpone the sale, and don't just accept the lenders word it will get done get it in writing, this is your house after all. The key here though is do not wait that long. You should start the process as soon as you that in your current situation you will not be able to keep up with the monthly payments.

If you have not fallen behind on your payments you may want to try refinancing your mortgage rather than modifying. Depending upon who your lender is you may qualify for refinancing even if you are underwater.

The next thing you need to be aware of is that you may not get a loan modification. Your lender will connect you with its loss mitigation department and may offer various options including forbearance, a repayment plan, a partial claim (depending on who owns the loan), or modification. There are different benefits and drawbacks to each option. Remember, your lender does not have to offer you anything and you do not have to accept any offer they make. If the offer from the lender does not seem fair to you or will not help you keep your home in the end, you can reject it. A lender may be willing to offer more than one resolution so do not feel that a situation is "take it or leave it."

If you ask for a loan modification and your lender is willing to consider it they will next request a myriad of financial documentation detailing income (paychecks, W-2s), monthly expenses, a statement of hardship, and anything else the lender may desire. Send these documents certified mail that way you can prove that your lender received the documents, the last thing you want to deal with is your lender constantly telling you to resend documents because they did not get them.

After receiving your document your lender will review those documents to determine if they will grant you a loan modification. If the lender agrees to grant you a loan modification do not just sign the document, rather read the document over carefully, find an attorney (preferably pro bono) to assist you if you are unclear on any of the terms. Remember it might have been unclear terms in the lending agreement that lead you to this point in the first place so make sure you are not just delaying the problem, but have actually been offered a real solution. Again do not assume that this is the only deal you will get and if it does not help it is not worth taking, but it is worth notifying government organizations and the Fraud Squad if lenders are not offering solutions that actually help consumers.

If you do not receive a loan modification and you know you will not be able to keep up with your mortgage payment then it might be time to turn to some of the home leaving options or prepare as best you can for the foreclosure process.