Homeowners Get a Lifeline

Home values have plunged to their lowest levels since 2004, according to First American CoreLogic. And at the end of 2008, one in five mortgage holders owed more than their house was worth. That's why, even with tantalizingly low interest rates, many homeowners haven't been able to find a lender willing to refinance their mortgage.

Now lenders may loosen their purse strings. The $75 billion the government is injecting into housing could help some nine million homeowners refinance -- or, if they're in dire straits, modify the terms of their loan.

The refinancing program is aimed at homeowners who are current on their payments but whose mortgages have fallen below the 20% equity threshold because of declining home values. Under the new program, you're eligible for refinancing if your loan is owned or was packaged for sale in the secondary market by Fannie Mae or Freddie Mac.

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To find out whether you qualify, call the lender to which you make your payments, or contact Fannie Mae at 800-732-6643 or visit www.fanniemae.com; or contact Freddie Mac at 800-373-3343, www.freddiemac.com/avoidforeclosure. The new loan can't exceed 105% of the current market value of your home, and you can't get any cash out. The program ends in June 2010.

If you're behind on your loan or can no longer afford the payments, you may be able to modify its terms in order to lower the monthly cost to 31% of your gross income. Loans must be on primary residences, must have been taken out before January 1, 2009, and must be equal to or less than $729,750.