Q: The interest rate on my loan just adjusted to 9.25 percent last month. We are upside down on our house by 5 percent, so we aren’t sure we can refinance. I’m trying to do a loan modification, but am being told that I have to be late on my mortgage or the lender won’t work with me.

I am now current and don’t want to miss a payment just so someone will help me. The loan modification company I’m working with wants to charge me a fee of $1,700. Will this save my house? Should I spend this money?

A: I have good news for you. The good news is that President Obama’s new mortgage refinance program should help you if your mortgage is only 105 percent of the value of your property.

For example, if your house is worth $100,000, and your primary loan is $105,000, you can refinance your home as long as you have the income to pay the new loan. The home must also be your primary residence.

Lenders will work with you on this program to lower your interest rate so that it is no more than 31 percent to 38 percent of your gross monthly income. The nice part about President Obama’s $75 billion loan program is that lenders and borrowers have an added financial incentive to keep paying these loans current.

Mortgage lenders will receive a “pay for success” fee of $1,000 for each eligible loan modification, plus additional fees of up to $1,000 per year (paid monthly) as long as the borrower pays on time. Homeowners will receive up to $5,000 (up to $1,000 per year for five years) to reduce the balance owed if they pay on time through these years.

The details of this plan were only announced in early March 2009. Please contact your lender as soon as possible. If your lender refuses to help, please call the Hope Now Hotline (toll-free 888-995-HOPE) and speak to a federally-certified housing counselor.

There are many credit and loan companies out there claiming that they can help borrowers for a fee. Be careful in dealing with these companies. If you pay them almost $2,000, you may not necessarily be getting the best deal. You should first work with your lender, call the Hope Now Hotline and talk to a housing counselor.

You need to become informed about your options. You may find that your current lender is now willing to talk to you. When you call your lender, ask to speak with their loan mitigation department, particularly if that wasn’t the department you were talking to. That department is the one that should be able to work with you on your issue. And, keep your $1,700 in your pocket for now.

April 3, 2009