While it may seem only the Wall Street fat cats get a break in this economic crisis, there is one corner of the loan foreclosure situation that actually enables homeowners to get a break as well.

It’s called a home loan modification. These are deals, negotiations with a lender on behalf of the homeowner who is facing possible loss of a home due to foreclosure. A lender will consider a recast of the mortgage to a manageable, affordable set of terms if the borrower can demonstrate some ability to pay, even if compromised from the past.

What’s required is documentation of income. This is looked at in relation to the monthly mortgage payments the individual is making. In many cases, those payments have ballooned due to a bad ARM (often, the borrower was unaware of the ARM terms and possibilities when the mortgage was first contracted).

But what most homeowners don’t understand is how low a bank is willing to go on the terms. Banks are in business to make money, but they also lose in a foreclosure situation because the process is costly. Not only do they have to engage their own lawyers and other staff in the proceedings, but they then are stuck managing a property and its sale. In the current housing crunch, the chances of them selling the property at a profit are slim. So, bottom line, banks don’t want to own the property. But only industry insiders know that point at which a lower-cost mortgage is and is not profitable to them. This is why thousands of homeowners are contracting with loan modification firms to do the negotiations for them. Home modifiers charge about a month’s mortgage payment in a fee (upfront, or in installments). If they are unsuccessful in achieving a loan modification, they then should (should, not all do, only the good ones) refund the fee in full.

It’s the only way to stop foreclosure for millions of homeowners. And, it works.