It's the understatement of the decade to say we're in a challenging real-estate market.
Your house is underwater, you're gasping for air, and you're wondering what to do. On a basic level, you can stay or you can go. That's pretty basic, but what you might not know is that there are several federal programs designed to help you make the most of your situation. You can review these programs and more at www.makinghomeaffordable.gov , but here are some of the highlights:
FHA Short Refinance Option. This allows those with non-FHA (Federal Housing Administration) homes who owe more than their home is worth, and are current on their mortgage payments, the opportunity to refinance. The trick is to find a lender that has signed the participation agreement with Fannie Mae and agrees to write off at least 10 percent of the unpaid principal, bringing the borrower's debt to no more than 97.75 percent of your home's current value.
Home Affordable Refinance Program. HARP works when the home value has declined and the borrower is current on payments (no late payments in the past six months, no more than one in the past 12 months); loan-to-value must be greater than 80 percent. HARP may require a new loan application, underwriting and refinance fees.
Home Affordable Modification Program. If you're employed, but struggling, HAMP may be able to lower your mortgage payment to 31 percent of your gross income. For example, if you make $5,000 per month, your payment must be at least $1,600 to qualify for the program. You must have sufficient, documented income to cover the new lower payment. There is a similar program for VA mortgages.
Second Lien Modification Program. If you've participated in HAMP and have a second mortgage, it's possible to modify that loan to make it more affordable, too. You cannot have missed three consecutive payments on the HAMP modification.
Home Affordable Foreclosure Alternatives. If you can't afford your home and need to move into a more affordable situation, HAFA allows you to complete a short sale without as much of a negative impact on your credit score as a foreclosure or conventional short sale. HAFA also provides $3,000 in relocation assistance, and a guarantee that your deficiency is waived by the mortgage company.
Home Affordable Unemployment Program. If you're eligible for unemployment benefits, UP could allow you to reduce or even suspend your mortgage payments.
As with any government program, there are hoops to jump through to take advantage of these programs. But if you're struggling to keep your head above water, they could provide a much-needed life preserver.
June Walbert and J.J. Montanaro are certified financial planners for USAA, The American Legion's preferred provider for financial services. Submit questions to them online. www.legion.org/focusonfinances 
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