The federal government's Hope For Homeowner plan started Oct.1 and a "proactive home retention plan" for Countrywide customers will begin in December. This program is slowly making its way to help homeowners as government is providing $40 billion to help homeowners to avoid foreclosure.

Under this program some customers will get reduced interest rate, either temporarily or permanently. Some will have portion of their debt wiped out and some will get loan forgiveness and loan reduction. All plans will be serviced by local banks.

The Hope for Homeowner plan is supposed to help 400,000 homeowners who can't afford their monthly payment, and who own more on their loan that their property is worth. This program encourages lenders to work with a customer directly which will allow customers to refinance into Federal Housing Administration, or FHA.program.

If you are in foreclosure lender will go through steps to determine the best choice for you. In most cases your adjustable loan will become 5 year fixed mortgage loan under FHA program.  Government is also considering extending 30 year fixed mortgages into 40 year mortgages. All refinances will be done through your lender.

The last option that any lender wants is debt forgiveness. In some cases banks would have to swallow losses. The lender would have to forgive all debt above 90 percent of your home value and allow homeowner to refinance into FHA secured loan.

For example, your property value is $100,000 and you currently owe $125,000. That means that lender has to forgive $35,000 of debt allowing homeowner to refinance $90,000 with another lender. The loan would be insured by FHA.

The homeowner who will take advantage of this program will have to share future appreciation with the government. For example, if your property is worth $100,000 and in few years you decide to sell for $120,000 the $20,000 is your profit. With that you have to give government $10,000, half of the appreciation.

What to do next:

If you are in foreclosure and need help you have two choices. First contact your lender to open negotiations under Hope for Homeowner plan. However, there is a report that homeowners have to wait up to 2 hours to just get to talk to their lenders to negotiate.

Other options are counseling agencies. One of them 1DebtMoney.com will be able to help you negotiate your options with your lender. Others that may work are non-profit agencies as well.

Counselors are here to help:

As this program makes into market there are many problems as of right now. Many customers experience providing different things and are being bounced around from person to person one requesting taxes, another pay stubs.

By now many homeowners should have received a letter from two major counseling agencies Hope Now and Project Lifeline, if not you may contact them at (888) 995-HOPE (4673).

Get Started:
Before calling any counseling agency, have your documents ready as they will be asking for any or all documents. List below will give you an idea what you would need:

1) Loan account number
2) Promissory note
3) Date of last mortgage payment
4) Amount past due and any letter that you have received from lender that your amount is past due
5) Any information if you have already talked to a lender, such as when you made the call, whom you talked to.
6) Any letters from attorney, court, etc.
7) Most recent mortgage statement
8) Name of your lender or bank
9) Your insurance policy, account number and insurance agent
10) Last two months' pay stubs
11) Last two months bank statements
12) W-2s and tax return from last year
13) An idea how much you can pay a moth for your home

Finally, you need to write a hardship letter explaining why you are behind your payments and suggest resolution in your cases. It can be anything from interest rate reduction to a longer repayment plan.

With this letter you need to paint a picture why you are behind in your payment. Credit counselors will help you with many options.