Steps that would be taken under the Home Affordable Modification Program to rework a loan for a couple holding a $450,000 mortgage.

1. Because the couple is delinquent and wants a loan modification, they must provide two recent pay stubs and the latest income tax filing, an affadavit of hardship, and detail debts and fixed living expenses, such as credit cards, car loans, student loans and alimony.

2. The bank or servicer compares monthly mortgage payments with monthly income before taxes. If the couple’s monthly debts exceed 55 % of income, they must get counseling by a federally approved housing counselor to get the modification.

3. From there, the federally set sequence of loan modifications starts with the goal of lowering the monthly mortgage payment to 38 % of income before taxes.

4. The interest rate is reduced to as low as 2%. Past-due charges are factored in and late fees waived.

5. If the goal is still out of reach, the loan period can be extended up to forty years.

6. If the 38 % is still unmet, part of the principal must be tacked on to the end of the mortgage and paid off when the house is sold or the mortgage period ends.

7. Finally, the mortgage lender or servicer could decide to reduce the mortgage principal to reach the 38 % target.

8. The federal rescue initiative also offers incentives to go down to 31 % by splitting the 7 % difference with the lender and servicer.

9. The couple is put on a three- month trial, and if payments are on time, the changes are fixed for five years.

10. In year six, the interest rate increases no more than 1 % annually, but there’s a cap - it can’t be more than the market interest rate on the day the modifications were finalized.

11. Mortgage lenders and servicers get financial incentives for modifying and keeping loans on track, but borrowers get $83.33 for each on-time monthly payment, up to $5,000 over five years. The money goes directly to the servicer to reduce the principal balance.