If you are having difficulty paying your mortgage, you can request a mortgage modification or a "workout" agreement from the bank that services your mortgage. The goal is to reduce your monthly payment to an affordable amount. The process of negotiating a mortgage modification can be frustrating, and for this reason you should consider seeking the assistance of a federally approved housing counselor or a lawyer who will advocate on your behalf.

Banks often are willing to modify mortgages for qualified homeowners as an alternative to foreclosure. Government programs, such as the Making Home Affordable Program, also provide incentives for banks to modify mortgages. A mortgage modification is preferable to foreclosure because you keep your home. If you can achieve an affordable loan modification, it is usually the best option.

Here are the main kinds of workout agreements your bank may offer you:

• Forbearance
   Forbearance is a short-term agreement that allows homeowners to postpone their payments temporarily without risking foreclosure. In a forbearance, the missed payments are postponed, not forgiven. At the end of your forbearance, you will still need to work out another agreement, such as a modification or repayment plan, to get caught up on your loan.
• Repayment plan
   In a repayment plan, your bank divides the past due amount you owe over a number of months. You then pay this repayment amount each month, in addition to your regular payment. These plans only work for a small number of homeowners who had a short disruption in income and have recovered enough to be able to afford to pay extra each month.
• Modification
   In a loan modification, the bank changes some of the terms of your loan to bring you current and make your payment more affordable. This can include adding your past due payments back into the loan, lowering your interest rate, reducing or deferring part of your loan balance or extending your loan over a longer period of time. Over the long term, homeowners benefit the most from reductions in the principal amount owed on their mortgages and from interest rate reductions. Less generous mortgage modifications include those that simply add the missed payments to the loan balance or extend the term of the mortgage for additional years.

Negotiating a mortgage modification requires persistence. Your bank may give you conflicting information or request that you submit the same paperwork multiple times. Different mortgage modification programs have different requirements. For example, some programs require the homeowner to document a financial hardship. You may be granted a temporary modification that will become permanent after a trial period. Stick with it and seek help from a federally approved housing counselor.