Obama's administration recently announced that 500,000 homeowners should get loan modifications by the end of 2009. Now the questions are coming in...What is a loan modification? Changes lenders make to an existing loan when the borrowers have a long-term inability to keep up with loan payments. Could include reduced interest rates, different type of loan, extension of loan term or all of the above. Am I eligible? If your home is a primary residence and the mortgage was taken out before 1/1/2009 OR your payment is 31% or more of your gross income, you might be eligible for a LM through the Home Affordable initiative. Your loan servicer will be able to tell you if you're eligible. When is a LM good for me? If you can no longer afford your payments but you could if your loan was modified. How to I do it? PREPARE!!! A detailed spreadsheet of your financial obligations that you can provide to your lender is a must. Calculate the average cost of every item - utility or service - you spend money on. Do this for the past three months. Write a hardship letter and include the necessary documentation. Send this to your lender and if you qualify work with them to fill out the paperwork.