Many homeowners are eligible for modifications to their mortgage loans. These modifications to interest rates, loan term and monthly payment can help borrowers who are at risk of losing their homes to foreclosure. The U.S. Treasury Department recently reported that borrowers approved for permanent loan modifications save a median of $500 per month on payments.

The Home Affordable Modification offered by Bank of America to its borrowers is part of the government’s Making Home Affordable program. This program can help borrowers who are struggling to make their mortgage payments due to significant financial hardship in the current economic downturn. The loan modification goal is payments of no more than 31 percent of before-tax monthly income.

Who is eligible for the Bank of America loan modification program? The loan must be for the borrower’s primary residence, and the amount owed on the mortgage must be less that $729,750. The program is only for mortgages taken out before January 1, 2009. The current first mortgage payment, including principal, interest, taxes and insurance, must exceed 31 percent of household gross income. Finally, the borrower must be able to document the financial hardship that causes difficulty in making the payments. A couple of examples of hardship could be a significant increase in mortgage payments due to the terms of the loan, or a significant loss of household income, causing one or more missed payments, or serious risk of missing a payment.

If you think you might be eligible, call the mortgage help number at Bank of America. Counseling to help you through the process is also available from the government agency Housing and Urban Development (HUD) and from other agencies offering loan modification assistance. Be prepared to present documentation about household income, including pay stubs and recent tax returns, as well as information about household expenses, such as all loan or credit card account statements, child care costs, child support payments, utility bills, and transportation and food expenses. You’ll need to bring recent bank statements and a hardship letter to explain the problem that is causing your payment difficulties.

If you are found to be eligible for the program, your loan will be modified on a trial basis, usually for three months. The information you provide will be checked for accuracy, and, most importantly, you must successfully make the payments during the trial modification period. Then, the loan modification can be made permanent.

By H. Milla