The best way for me to define “every possible effort” is with a story.  I have dozens like it that I could have chosen from. I like this one a lot, and it’s all true.

About the time the market started to turn early in 2007, I got a call from a client for whom I wrote a mortgage to buy a home a couple of years earlier.

These folks were a “one-income family” and relied a little bit on some seasonal overtime and a nice tax refund in order to make ends meet. He was in the commercial construction union and had 10 years of history, each year making a little more than the previous. They were doing very well financially. They had a savings account, very little personal debt, a retirement nest egg started, and a nice standard of living.  Living the dream.

You know where this is going. First he lost his overtime. Then his hours were cut below 40. And then his pay rate was cut. They were hanging in there, but some debt was accumulating. They didn’t think this would last much longer. None of us did.

Then there was no more work. The savings goes away first. Then much of the retirement account. Unemployment comp started and ended. Then some work five hours away was available – they took it.

At this point, the mortgage was regularly behind a month or two depending on the work load, and the calls started coming from their other creditors. She received nasty calls every day. He was gone for most of the week, and she was left with the kids, often without grocery money, and a few times without enough money to put gas in the car. She was tied to the house.

After all that, they had to let go of one cell phone because they needed to cut back. He would call the house most nights from a payphone – try finding one of those in 2009. Some weekends he sent all the money back to pay bills, leaving nothing for gas and the trip home. Other times they made the hard choice for him to work a Saturday rather than come home.

I’m not making this up. In my house, this would not have to go on for long before either one would have started going certifiably crazy. Separated from your spouse. No relief in sight. Bills piling up. I wondered how long they would make it.

The following list is not exhaustive but is some of the behavior I witnessed over the past two years as this client called often for advice and encouragement.  Let me say up front that I almost tear up as I write this. I am sure that I am more encouraged by this couple’s actions than I could ever have been an encouragement or help to them.

The first thing she did was to start cleaning other people’s homes. With kids in school she had a few hours a day and used that time to try to make $30 or $40.

When summer came she took her kids along and together they weeded their neighbor’s flower bed and mowed a few lawns – this paid for groceries, some gas for the car and a utility bill every so often.  How many of us would have that kind of humility?  She asked her neighbor if she could pull her weeds.

She was also able to do some regular babysitting in her home eventually.  This was some regular money and helped a lot towards making ends meet.

We shouldn’t minimize her husband’s part. He was working in Indiana, four hours away, often rained out and sitting around (unpaid) with nothing to do and then having to work the weekend to make up for it. He shared “college-style” housing with 4 or 5 random co- workers. His main goal was to not spend money. He did this for over a year. He sent almost all of the money he made home each week.

By the time he was able to get work in MI again, they were more than three months behind on their mortgage. They were literally at the mercy of the lender.

She called the mortgage company often and sent them money as often as she could. She kept meticulous notes of conversations and accounted for the money she sent them.

Last November she was offered a loan modification. Just about that time the MI work started and they were able to catch up a little bit. While submitting document after document for the loan modification, she was advised by the lender to not make payments until it was approved. This worried her because her loan was getting further and further behind. Instead, they put the money in a savings account, just in case.

In July I got the following email from her (an excerpt):

Hi Evan!

I was just wondering what you think I/we should do about our mortgage.  It is “still” in review for loan modification and they will not allow us to make a payment on it.  We have almost $8000 set aside to make a payment with but no one will accept until the process is complete.

To date, we’ve not been served with any foreclosure paperwork and I hope that I am not jinx’ing myself by saying that! 

Finally, last week they got an offer. For $2000 out of pocket, they would get a lower rate; the bank would capitalize the late payments and give them 36 months to pay off the escrow shortage.

Of the $8000 they had saved, they only need to use $2000 to make their mortgage completely current! They now have a $6000 emergency fund.

After talking with her I also learned that she had negotiated and paid off almost all of their other debt in the last year as well. She said that she had gotten really good at living on less and used that new skill to pay off debt.

Now that the other debt is paid off and her mortgage is current, she estimates it will take less than three or four years before they will have saved what they had before.

One year ago, if you would have asked this couple if they thought they were going to succeed – they would have said some thing like “I sure hope so.”  The fact is, they didn’t know if this was all going to turn out well or if ultimately they would lose their home.

There is nothing ethically wrong with foreclosure in and of itself. A foreclosure is a neutral action and is inevitable in some cases. The error comes when we allow a sense of entitlement and fear to take over, and we give up when there is still something left to try.

For every situation that turns out like this one, there are some where the couple made every effort they could think of and it still wasn’t enough. My heart goes out to anyone in that situation. Know that this loss is not an indictment. This event does not make you a failure. Learn from it and move on.

For those of you who are still fighting:

Never give up.  Never ever give up.

Make every possible effort. Make them pry your house keys from your cold, dead fingers.

Not everyone will qualify, but for those who do—and the government’s hoping that 3 to 4 million do—$75 billion has been set aside to fund the program (and to provide banks a monetary incentive, good news for the borrower).

Here are some frequently asked questions to help you navigate this…

1. What is a loan modification?

This is a change in one or more of the terms of a home loan. Generally speaking, it allows the reinstatement of the loan and provides lower monthly payments. You may also hear it referred to as a mortgage modification, restructuring, or workout plan. Under Obama’s plan, the goal is to help the borrower reduce monthly payments to 31% of monthly income or lower.

2. How do I qualify?

The short answer is that you’ll need to show that modification will make the difference between your keeping the home and losing it. So you’ll need to prove financial hardship—loss of income and/or increase in expenses due to job loss or relocation, divorce or separation, death of spouse or other, illness, or even military service; and you’ll need to prove responsibility–proof of income, and a complete and accurate disclosure of your financial statement.

3. What are the restrictions?

Here are a few: Only those living in the home on which the loan is being paid are eligible. Mortgages on second homes, investment properties, commercial properties, and vacation homes are ineligible. The mortgage must have originated prior to 2009 and be no more than $729,750.

4. What is the procedure?

The bank will look at your monthly income and monthly loan payment. Under the MHA, borrowers can lower their payments to less than 31% of income. One or more of the loan’s terms may be adjusted to meet this. The new mortgage payment will then be in effect for five years.

5. Do I have to be currently delinquent on my payments to get a loan modification?

Not necessarily. One of the goals of the program is to help borrowers before they get into trouble. To that end there’s a provision and incentive which allows lenders to reach out to those homeowners who are not yet delinquent but deemed at risk.

6. Will a loan modification help me stop foreclosure?

Yes, it will. And that’s the program’s main goal. You’ll work with your lender to find a payment solution that halts the foreclosure and/or reinstates the loan.

7. Can my missed payments be added back into my new loan modification?

Yes. Arrears can be rolled into the new loan balance, making it current.

8. Can I do a loan modification myself or should I pay someone to represent me?

Before the MHA program came along the burden of getting a loan modified was largely on the borrower’s shoulders. But incentives for the lenders to get involved are making that less so. Still, it’s not a simple process. For what it’s worth, the Treasury Department is discouraging third-party, fee-based representatives. But the decision is yours. Either way, learn the process (you’re starting that now), think like a bank when putting together your materials, and know your legal rights.

9. How long will the MHA program be available?

Through the end of 2012.

10. So how do I get started?

Be informed, learn all you can, then contact your lender’s loss-mitigation department.