When a bank starts sending notices to homeowners that their property is in foreclosure proceedings, it’s not the end of the story. As one single mother, a homeowner, told a financial news show recently, “I thought it was time to give up, that the horses were out of the barn.”

Fact is, those notices are to be taken seriously. But it’s not like there aren’t options available to them. The government bailout plans are being worked out, but the answer now for millions is in a loan modification program. This is when a mortgage, say an ARM, is recast into a better mortgage package. Instead of paying 10 percent interest, the rate might be lowered to seven or six percent or lower.

Why would a bank agree to such terms? They don’t really want to go into foreclosure. They would rather keep you as a customer, paying a profitable amount to them for years into the future. They want YOU to take care of your house, not THEM. It’s expensive for them to go through the process.

But most people don’t know how to get modified loan terms on their own. They are perplexed by banking terminology, and lack industry knowledge on what to negotiate. 

Enter the loan modification specialists. These are lawyers and accountants who know their industry. They can see where a lower interest rate charged to you still is profitable to the lender.

Check loan modification firms for fair fees (about one month’s mortgage payment), success rate with past cases 90+%) and ask for a money back guaranty (the good ones offer it). They can be a lifeline to the distressed homeowner — and they can save before all the horses have left the barn.

No homeowner currently “underwater” with a loan that may be larger than their home’s value, or, who simply has trouble keeping up mortgage payments, should consider what they did a “mistake.”  There has been a flurry of media attention on financial TV programs about the economic crises being the fault of underqualified borrowers. That is flat-out wrong: the message for generations has been that everyone should try to own their property. The banks were more than happy to provide everyone with a loan.

The problem is the turn taken in our economy since 2007. Jobs have been lost, people have gotten sick with inadequate healthcare, and other problems arose. The banks were mismanaged in so many deep, demonstrable ways. To put the blame on anyone with an exploding ARM or simply a mortgage that is no longer affordable is invalid and unproductive.

The individual homeowner facing possible foreclosure has an underreported option. It is to get a loan modification. This essentially is a way to clean up the mess of a mortgage with bad terms, such as a high interest rate. A loan modification company will act as an intermediary or third party, approaching your lender on your behalf. This is key, because a loan modification firm has far more knowledge of how the industry works and what terms are morel likely for the bank to accept.  

Anyone considering the hire of a loan modification firm should check their success rate (more than 90%?), and their money-back guaranty of your fee if they are not successful. If it checks out, go with that firm. For the cost of about one month’s mortgage payment, you may get tens of thousands of dollars in savings over the life of the loan.

At its best, a challenging economic situation such as a home foreclosure is a minute-by-tense-minute adventure in the world of Economics 2009.  When your life is a lot like what’s being reported on the news, you at least know it’s a drama being played out in homes all across America.

Of course, a home mortgage foreclosure can have tragic consequences for anyone who bought a house or condo in good faith that ownership was laudable and affordable. But things changed rapidly in the past two years, such that illness, divorce, income loss or reduction and ARMs blown up out of sight are factors that may seem impossible to overcome today.

There are solutions, however, but they’re probably too boring to make the news. Certainly, the solutions wouldn’t make it into a screenplay. These solutions come in the form of loan modifications – a recast of the loan terms that help homeowners keep their properties at lower monthly payments.

To engineer a loan modification is daunting for most individuals who are not real estate lawyers or mortgage experts themselves. Bank loan officers are busy handling hundreds of cases and thus don’t have a lot of time to talk to individuals to explain the process for them. But a loan modification firm handles it for them. For the price of about a month’s payment, a loan modification company can use industry insider information to know what new mortgage terms the lender would agree to.

If considering working with a loan modification firm, check their policies, features and success rates – all usually published on their websites.  Look to see if they provide a money back guaranty if they are not successful. I particular, see if they offer an installment payment plan for their services. This is crucial to any financially strapped homeowner.

There’s a new wind blowing in the economy. No one is calling the recession over yet, by any stretch of the imagination. But as vulture funds buy up “toxic” bank assets – showing that there is value in everything once everyone agrees to a price – homeowners themselves are learning to take control of their situation and their homes.

The tool emerging for homeowners in distressed mortgage situations is loan modifications. These are not loan refinancings, although they are similar. Few people in distressed situations, with loss of income or illness or divorce challenging their credit rating, are eligible for refinancing. But if the homeowner can prove some ability to pay monthly on a mortgage at a reduced rate, the bank will consider a recast of the mortgage terms.

That’s right, banks will negotiate. The problem is most homeowners don’t have the savvy to negotiate better terms on their own, if they know the option even exists. They don’t know how low a mortgage lender is willing to go to keep a customer and avoid taking possession of a home (banks don’t like owning residential property – it’s not what they are good at and they usually lose money in the process).

Enter the loan modification consultants, specialists in real estate law and lending. For an affordable fee, about one month’s mortgage payment, the loan modifiers will approach the lender with industry knowledge of what deal will work for both the borrower and the lender. Loan modification companies that know their stuff will not take a case without 90 percent certainty they will succeed in the effort. And if they fail, they should return 100% of the borrower’s fee. This makes it a no-lose proposition for the homeowner.

It’s not like it’s 2005 all over again. But it’s one of several hopeful signs that there are solutions in this economic crisis. The homeowner needs to take action by finding a loan modification specialist to do the work for them.

For anyone with an out of control ARM, perhaps in danger of losing their home to a home loan foreclosure, the quest for better loan terms is like a page out of Goldilocks and the Three Bears. The trick is to get the new loan terms just right.

But first some background: Banks don’t like foreclosing on home loans. They would rather keep a homeowner paying off the mortgage for the full term, usually 30 years. That’s a lot of time to not only receive a monthly flow of funds, but also to sell that customer on other financial products. Foreclosures cost money to execute, cut off that income flow and then saddle the bank with tainted property that’s harder to sell in any market, particularly the current housing meltdown.

Consequently, mortgage lenders are amenable to adjusting terms of the mortgage lower if they can still make a profit. But how low is too low? And at what rate is the borrower still spending too much?  Too little, too much, searching for “just right” is a Goldilocks’ journey.

This is where loan modification companies help holders of distressed home loans. The average borrower doesn’t know enough about the industry and specific lenders to negotiate to this point of “just right.” Most borrowers are so distraught they are lucky if they can manage the process of cutting through lender bureaucracy to even get a bank officer’s attention.

Loan modification companies operate on a fee charged to the homeowner, such that their only objective is to get the best deal for that borrower. They can examine a case before taking it on, such that they can predict a favorable outcome with high (90%) accuracy. Better firms offer a money back guaranty if they fail to deliver as promised.

To be clear, this is no children’s tale. Loan terms can be modified, but a professional is likely to achieve the best success for borrowers.