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.

For millions of Americans who are in home loans they didn’t understand – with terms such as skyrocketing ARMs (adjustable rate mortgages) that are beyond their means to pay – it may be challenging to now consider using a loan modification firm to help negotiate a new loan.

The deja vu is in working with legal and financial experts who know more than you. Are they in it for a quick buck too?

First, understand what loan modification people do. On your behalf, paid a fee by you, they approach your lender to request better mortgage terms. Maybe they’ll get a rate reduction, or a reduction in monthly payments through a longer term (40 year) mortgage. Their goal is to keep you in your home at a payment schedule you can afford.

So what’s in it for them? You are asked to pay a fee of about one month’s mortgage payment. That’s it. And the better firms offer more: they should predict with 90 percent accuracy if they will or will not succeed in working on your case. And if they don’t succeed, they should offer a 100 percent money back guaranty (not all do).

How do they succeed where you might not? They know that banks don’t want to own houses. They know that foreclosure proceedings also cost the bank money to pursue. They also know that banks would prefer to keep you as a customer, providing them a monthly stream of incoming payments. But most important, they know how to cut through the red tape and voice mail jungle to talk to the right people.

It’s your home. It’s the place you retreat to every night after facing a not-always-kind world. It’s the place where you house your family, maybe children and a pet. You don’t want to lose it to a foreclosure.

But if the terms of your home loan are unmanageable – due to loss of income, other unexpected costs, or an adjustable rate mortgage (ARM) that is out of sight – you may very well be distressed. If the bank has begun foreclosure proceedings, you can’t help but panic.  It’s your home.

Dealing with large banks – particularly lenders who are not in a building down your street, but are in far away places that you only talk to on the telephone – can only add to your stress. The tangle of voice mail, being put on hold, then talking to a distant bureaucrat who may not seem helpful, all make the process almost impossible.

This is why there are third parties who are helping thousands of homeowners stop foreclosure and negotiate better loan terms. They are loan modification professionals.  They are lawyers and banking finance experts who know the lender’s hot spots – what the lender’s position is. They know the lender really doesn’t want to take possession of your house. It’s usually a loser for them. And, they then lose a customer. When the loan modification specialist can demonstrate to the bank that you, the borrower, would be able to keep up monthly payments but at reduced rates, almost always the bank will agree to recasting the loan terms.

A reputable loan modification firm charges about one month’s house payment, and will return 100% of the fee if they are not successful (they generally can predict success with about 90 percent accuracy).

So of course staying in your home is an emotional experience. But a cool headed professional is who you need to make sure the negotiation is successful.

Maybe you bought a fixer-upper home because you’re handy.  Perhaps you’re good at paint, and know that a good coat of well-selected colors can brighten up any house and any room.

But if your mortgage is what needs fixing – perhaps you have to stop a loan foreclosure – it’s not a weekend project for non-professionals. A difficult, distressed mortgage is the work for professionals, people with the right training and expertise.

First, most people don’t know they can hire an intermediary to work with their mortgage lender. You can — they’re called loan modification specialists. Of course most of us deal with someone in a phone bank to discuss late payments, difficulties, current interest rates, etc., but when you’re trying to recast the terms of your mortgage, you need to talk to someone at a higher level.  Who, and how do you get there? Once you get someone on the phone, how do you get and keep their attention? The average bank home loan officer has 700 cases to work on. They need to be dealt with in a professional, cut-to-the-quick way.

Loan modification intermediaries know lenders – many of them were bankers themselves in the past. Others are real estate and finance attorneys, applying their expertise to your financial and housing well being. When they take on a case, they do so with more than 90 percent confidence they will succeed (they’ll ask preliminary questions to ferret out if your case can be made convincingly). Then they approach your mortgage bank with background knowledge on the bank itself — how expensive would it be for the bank to foreclose on your property? And under what terms, more favorable now to the homeowner, will the lender agree to adjusting the mortgage? It’s a matter of dollars and cents, but it’s also about knowing what to say and to whom.

If you engage a loan modification professional, your chances are greater that you’ll stay in your home — and be able to continue those Do-It-Yourself projects that ultimately add value to the home.

Does it make sense for you to deal with the legal and financial complexities of your troubled mortgage by yourself?

Probably not. In fact, the root of many of the nation’s mortgage woes are because millions of borrowers either didn’t read the fine print or know what the words in the fine print meant. Huge monthly payment increases came as a surprise to many of them, as did the downturn in the market that puts their home “underwater,” worth less than what they are obligated to pay.

Loan modification programs are the answer. A loan modification firm is staffed by attorneys, accountants, and financial experts who understand not only the meanings of the terms, but also the financial position of the mortgage lender. Loan modification experts know that a bank loses in a foreclosure – the bank does not usually gain (particularly in a market such as we have now) by owning properties. The bank also spends money on the foreclosure process itself, therefore, the bank would rather not proceed with foreclosure.

A good loan modification firm can look at your case and determine if you can beat the system, so to speak. Your financial picture, the terms of your mortgage, and the condition of the lender are taken into account by the modification specialists, who then will give you a prognosis. If they think they can win – get you better mortgage payment terms, such as a lower monthly payment because of an overall lower interest rate – they will tell you they can with better than 90 percent certainty. And if the firm is any good, they will also offer a 100 percent money back guarantee.

There are situations where it pays to use a professional. For millions of homeowners, this is one of them. It can help them stop a home loan foreclosure dead in its tracks.

For the homeowner who has suffered the financial challenge of skyrocketing interest in an ARM, or a heartless system that fails to protect them from job loss or costly illness, it may seem that no one is looking out for them.

But difficult times do create heros. Loan modification firms have figured out that a tremendous amount of waste and loss happens in foreclosures – for all parties involved. To stop foreclosure means they negotiate with banks on the borrower’s behalf, finding the middle ground where the bank can keep a customer and not own a house, while the borrower keeps his or her house and even gets lower monthly payment terms.

This win-win is possible because loan modification firms are staffed by lawyers and financial professionals who have the knowledge to negotiate. They earn a flat fee on loan modifications – generally, about a month’s mortgage payment – and they have a great deal of confidence on when a case will succeed before they go to work, simply because they are familiar with what factors will mean something to the bank.

Most reputable loan modification firms offer a 100% money back guaranty if they do not succeed (a rare occasion). This is testimony to how well they understand where banks stand relative to the housing market meltdown.

The scenario is typical in this economy and the housing meltdown: A homeowner experienced hardship and a mortgage rate increase that together put her behind in her payments by more than $10,000. Included in that are property taxes with stiff penalties for late payments. The homeowner has monthly income, but not enough to cover her regular payments, much less this back-due amount in arrears.

To stop foreclosure, the homeowner tries to contact her bank to find out options for working it out. Unfortunately, after several attempts at reaching a live person, the person she gets can’t tell her more than what she already knew, that her situation was a problem.

This homeowner is wise to engage a mortgage loan modification company to work the situation to her best advantage. For about the cost of one month’s mortgage, the loan modifiers will examine her case for foreclosure prevention opportunities. A reputable firm will not take a case unless it shows a high probability of succeeding, and if it fails in the end, they should pay the fee back with a money-back guaranty.

A loan modification outcome is always favorable to the borrower (but beneficial to the bank, which does not profit in managing and reselling properties at a loss). The borrower not only retains ownership of the house, but usually gets manageable monthly payments at a reduced interest rate locked in.

Arrears – back payments that many seem insurmountable to a borrower – can be rolled into the mortgage principle as a means for a homeowner to play “catch up” on his or her loan.

This is one of the potential outcomes of a loan modification plan. Most homeowners don’t realize that a bank is willing to shuffle the decks, so to speak, in stop foreclosure from happening to a homeowner.

Why? Banks hate to foreclose on property. It takes time and money to do so, and even the loan officers, hardened by the realities of the current economy and housing and lending meltdown, find it psychically draining.

An example would be couple A, suffering a reduction in income simultaneously to their ARM increasing monthly payments by $900 at a 9.75% interest rate. They struggle at first to manage it, but when other unanticipated expenses come along they fall first one month, then two or more months behind in their mortgage payment. Their property taxes are paid in escrow through the mortgage, so that then gets behind also. After about 18 months, they are facing foreclosure with $13,800 owed to the bank and their county assessor.

A loan modification team of lawyers, financial and real estate experts negotiating with the bank on behalf of the homeowner, is able to prove the couple could keep up payments if the interest rate were lower and the $13,800 debt is folded into the principle due. The bank agrees, and everyone emerges from the situation in better condition. Anyone looking for foreclosure prevention should consider this path, most probably through engaging a loan modification firm.

Even as the government moves to shore up the housing market and stop foreclosures, it’s become clear to millions of homeowner in distressed situations that they need to take control of their situations.

Many are boning up on loan language, studying their mortgage documents, yet finding even getting ahold of a loan officer with time to listen and help them to be the problem. The problem is banks are overworked and in their own distress right now — some officers are handling 800 cases each, so for individuals trying to work out better mortgage terms it is a difficult proposition at best.

The most effective means for borrowers to recast the terms of their ARM or other troubled mortgage situations is to work with loan modification companies. These are lawyers, financing specialists and real estate professionals who understand how banks, hard money lenders, work. They know a bank loses in foreclosure too. And unlike a homeowner facing possible loss of property and the need to move, a loan modification company works without the emotions that can derail a conversation between a borrower and a lender. They’re all business, and work on the homeowner’s behalf.

While the Obama administration’s proposals to save homeowners from foreclosure, to recast the terms of their ARM or other types of troubled loans, will help millions, millions more homeowners will not qualify or may not get help in time to stop their own foreclosure.

Anyone in pre-foreclosure or in danger of going there soon would be smart to find $300 to pay a loan modification firm to help renegotiate terms of their mortgage. A loan modification firm has its own lawyers, banking specialists and real estate professionals who understand what will get bank’s attention. They know what it costs a bank to execute a foreclosure – in fact, no lender benefits when that happens. They get stuck with properties that cost them money and will likely lose as they try to sell in this down market.

A loan modification firm is a means for homeowners to take action, even if they are intimidated by lenders and the language of loans and foreclosure. The homeowner is freed from the burden and emotion of negotiation, working with professionals looking out for the borrowers’ best interests. In the end, everyone wins.

Note: Be sure to hire a loan modification firm that will only take a case with a high degree of certainty that they will succeed in achieving better terms, and in the unlikely case they do not, that they will refund your fee.