The oversupply of housing is affecting distressed homeowners in a multitude of ways. For many who can’t keep up with their mortgage payments, they are in an “underwater” situation – the sale price of the home would be less than the amount owed. To walk away from their home, they still would owe the bank money. Further, the neighborhood overall sees a drop in their prices with each foreclosure, and the problem multiplies with other people living nearby.

It benefits everyone if a foreclosure can be stopped. Especially the banks, the lenders. They stand to lose about $50,000 per foreclosure in legal fees and the business of owning and reselling the property.

This is why banks are willing to cut better deals with homeowners who otherwise face a loan foreclosure. The bank is willing to settle for less money that is still better than that $50,000 loss they would experience. But most homeowners do not understand how to go about a loan modification – it gets little attention in the media, so most people don’t even know about them.

Enter the loan modification professionals. These are lawyers and home finance people who know the industry very well. They can efficiently examine a case, look at it in comparison to the bank’s position, then negotiate the solution to the homeowner’s favor. Reputable loan modification companies will charge a fee of around a month’s mortgage payment, and provide a money back guaranty if they are not successful.

It’s a solution to the housing crisis for millions of homeowner, their neighbors and their banks.

A fact that is not reported very much is how banks stand to lose an average of $50,000 on every property they foreclose upon. In other words, banks have incentive to not foreclose on property, even if it means changing the terms of the mortgage in favor of the homeowner.

In fact, millions of people with distressed mortgages from accelerated ARMs, income loss or other difficulties are having their mortgage recast in their favor. It’s largely a matter of talking to their lender, explaining their circumstances and hitting a number that is easier for the borrower and still profitable for the bank.

Of course, this is not an easy negotiation for anyone who lacks facility with legalese or the mathematics of banks. This is why thousands already have hired a loan modification firm (lawyers, accountants, mortgage industry specialists) to handle this negotiation for them. The loan modifiers look at the facts of the case, at which point they can predict with a high degree (90 percent or higher) of confidence as to what the outcome will be. Homeowners pay an upfront fee equivalent to one month’s mortgage payment, more or less, which is refunded to them if the loan modifiers are unsuccessful in that effort.

Home loan modifications are also an underreported factor in the current housing crisis. Even homes in foreclosure proceedings can halt that process with a loan modification.

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.

Alright already. Everyone’s had enough of the doom and gloom of the economy. If you’re a homeowner with a distressed mortgage, perhaps because of a crazy ARM that has increased your monthly payments to an intolerable level, you’re probably sick of hearing about how bad things are.

Here’s the good news that gets little attention in the press: your mortgage terms can be changed. And it doesn’t take super stellar credit, as is required with a loan refinance. Loan modifications are for people who’ve faced difficult circumstances, such as loss of income, divorce, illness and medical bills, or other adverse situations. A loan modification is when a bank looks at an individual situation and decides that it would be worth more to them to NOT foreclose but instead work out a manageable plan with the borrower.

The trouble is most people don’t know about loan modifications. And of those who do, the whole process of approaching and dealing with a bank may be intimidating. Bank officers are harried enough with all that’s going on their industry. Typically, a loan officer has 700 cases to manage, many of whom are emotionally distraught people (and understandably so). They would try to help if they had the time to educate you.

A better path, one taken by thousands already, is to engage a home loan modification specialist firm. These are qualified experts in mortgage law and finance. Typically, a lawyer and a finance person will examine your existing loan and the rest of your situation, then look at who your lender is. They have insider industry information on what a bank may want to do.

When your mortgage is successfully renegotiated, you pay the loan modification firm a fee of about one month’s mortgage payment. If they are not successful, you owe no payment at all (check: only the better firms provide a 100 percent money back guaranty). In the end, it’s a no-lose quest for the homeowner who is worried about keeping their home.

There is a sense of powerlessness to any homeowner who is falling behind in their mortgage payments. It seems that the system and circumstances – big bad banks that want to foreclose on your home, because of a bad economy, ARM increase, job loss, illness or a lousy housing market – are all working against you.

But in fact banks and other lenders don’t want you to lose your house. They don’t want to own it and they don’t want to lose you, their customer. If you were able to keep paying every month, that’s a positive cash flow for them. And when stuck with a foreclosed-upon home in this depressed market, they will likely lose money in selling it.

This is why loan modifications are being worked out for thousands of homeowners. A loan modification is a recast of mortgage terms, generally resulting in a lower monthly payment that allows the borrower to stay in their home and continue holding title. But most borrowers are not familiar with this option, and much less don’t know how to negotiate it.

Home loan modifications help fill this gap. They are professionals – lawyers, accountants, home loan finance experts – who know inside industry information on what a bank will be willing to do. They know that point at which a deal is a winner or a loser for a bank. So their job, working entirely on behalf of the homeowner, is to hit the lowest, most affordable terms possible while still satisfying the lender that this mortgage will be good for them over the long haul.

It’s really rewriting a mortgage, always to the benefit of the homeowner. This is something rarely reported in the media, which tends to focus only on the negative.

Note: working with loan modification companies should carry no risk. The better loan modifiers know with high certainty what success they will find once they examine the specifics of a case. And they should offer a 100 percent money-back guaranty in case they are not successful. Fees generally are around one month’s mortgage payment, not points or a recurring expense. Many firms are allowing fees to be paid in installments.

While your home may be a much bigger asset, the loan on it when in distress is more manageable than most car loans. With a car loan, if you are unable to pay on the terms the car is repossessed rather quickly.  But home loan foreclosure laws require a process that allows the homeowner to work out solutions.

And there are options for managing a home loan, to recast the mortgage terms to a more favorable outcome for the homeowner. If a homeowner can prove an ability to keep up payments, even if less than the original terms, a bank will be amenable to working it out. Why? Banks don’t want to repo your house.  A car can be easily sold again, but houses are far more complicated. Plus, the bank has to spend money in the foreclosure process, only to lose a long term customer in the process.  They want to keep you in your home. Really, they do.

Still, many homeowners are unfamiliar with how to achieve a loan modification. The terminology is unfamiliar, and they don’t know who exactly to talk to at the bank. This is why many thousands of people in danger of home loan foreclosure are turning to professional home loan modification specialists. These are lawyers and mortgage finance experts who know how banks work, and what financial arrangements remain attractive to a bank even if the monthly payments from the homeowner are reduced.

If working with a loan modification firm, check their offerings. Do they have a high success rate, over 90 percent? And if they fail to succeed in negotiating your mortgage to more favorable terms, will they refund your fee? As far as fees go, it should be a set, one-time fee, not points or a recurring expense, perhaps offered on an installment plan. With these factors, the homeowner is in a no-lose situation.

In the past it used to be moral shortcomings that were associated with home loan foreclosures. Drunkenness, drug addiction and a general failure to keep up an income were what led to distressed loss of a home. But this is not your father’s housing crisis and economic meltdown. Today it is job loss, skyrocketing ARMs, illness not covered by insurance, divorce and a housing market where very little sells that leads to mortgages in trouble. The monkey on our backs is circumstance not asked for or deserved.

But it is what it is. The best way to manage the situation is to seek alternatives. The government mortgage plan might work, but might not work in time for millions who are facing foreclosure now. For those homeowners, a loan modification program might work best.

A loan modification program is basically where you approach your lender and say, “Look, I can’t make the payments I’m now stuck with. But I have some income, and can make lower monthly payments under different terms. Let’s make a deal.”

And banks will listen and deal, if approached in the right way with the right information. The problem for most people is they don’t know the financials on the bank’s side, what lower, recast mortgage terms they will agree to. Also, bank loan officers are managing hundreds of cases and thus are not able to help most homeowners with this process.

That’s why thousands of homeowners are using third party intermediaries, home loan modification specialists. These are home financing professionals, lawyers and accountants who work on the homeowner’s behalf. Their one goal is to get a better, manageable mortgage for the borrower. If they’re good, they will know with high certainty (90 percent or higher) whether a case will be successful, and if they still don’t succeed, they will refund the fee to the borrower (fees range from $300 to the monthly mortgage currently paid).

It’s funny thing (in a non-laughing kind of way) that it’s homeowners who are saddled with the responsibility of fixing their distressed mortgage situations. The lenders created loan documents that were difficult to understand and often lent to people who would have trouble making terms, particularly when an out-of-control ARM consumes more than 50 percent of the borrowers’ income – and that’s in good times.

Now that there are millions of homeowners with home loans dangerously close to foreclosure, the banks are suffering the fallout. Regardless of who gets blame for the past, the savvy borrower is learning to negotiate with the banks. This wins them better mortgage rates and lower monthly payments to keep the borrower in the house.

It’s actually possible to do this negotiation, called a loan modification, on one’s own. But professional loan modifiers are lawyers and finance people who are likely to do better – in fact, more skilled loan modifiers can predict with 90 percent accuracy in advance if they will be successful. Professional loan modifiers have industry insider information on what a lender will be willing to give in the modification process.

It’s important for any borrower to receive a money back guaranty, a 100 percent refund if the loan modifiers do not achieve favorable terms. Fees charged overall should be approximately one month’s mortgage payment.

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.

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.