With the revelation that many big lenders were "robo-signing" documents - signing them without verifying the accuracy of the information - to move foreclosures through the process, several banks, including JPMorgan and Bank of America, temporarily halted foreclosures to ensure that all paperwork was in order. The resulting outcry has led to the executives of several large mortgage providers being called before congress to answer for their companies' actions.

Many in Congress are seeking solutions that would keep Americans in their homes rather than face foreclosure. Loan modification is seen as a possible solution to the problem.

According to Senator Tim Johnson (D-SD): "Foreclosure should be the last option and we need to examine barriers to mortgage modifications."

The Government's HAMP Program

While the government again appears to be pushing for lenders to work with borrowers to restructure loans, it should be remembered that loan modifications were previously thought to be a possible fix to the situation.

Touted by the Obama Administration, the Home Affordable Modification Program (HAMP) set out to help up to three million troubled American homeowners stay in their homes. The Wall Street Journal reports, however, that of the 1.4 million homeowners who were approved for temporary modifications, over half have been dropped from the program because they did not actually qualify for the loan modification. Many of those same families are now back into the same dire situation they were desperately trying to avoid, facing foreclosure.

Neil Barofsky, special inspector general of the Troubled Asset Relief Program (TARP), states that HAMP "has undoubtedly put people into foreclosure." When a borrower approved for a temporary modification is later found not to qualify for HAMP, the borrower is then responsible for back payments to make up the difference between the modified payment and the original payment, late fees and penalties accrued in the interim. If that money cannot be paid, foreclosure proceedings could begin.

While HAMP had its own issues, hopefully a new solution or loan modification program can be developed that will help the many Americans who are struggling to stay in their homes.

If you are facing foreclosure or currently in foreclosure, you may have options in the form of loan modification, negotiating a temporarily lower payment or filing for bankruptcy. It is important to speak with an experienced bankruptcy attorney about your situation as mortgage companies are not always going to act with your best interests at heart - protect yourself.