Ed, If you have a Counrywide loan then you might be able to qualify for a modification under the agreement which was signed with the Attorney General (AG) of California, Jerry Brown. It has specific requirements which you can check out by going to the Attorney Generals web site. Google it and look for the Bank of American/Countrywide Home Loans settlement agreement. One of the settlement agreements was to re-write your loan to 80% of current market value!! That's HUGE!
Beware of the Loan Modifier.This is a totally un-regulated industry and has attorneys, Real Estate Agents and Loan brokers all trying to now get paid for working a loan mod(modification) for you. Many are using tactics such as predatory lending as a ploy to strike fear into the hearts of the lenders. Some advise you stop making payments, "squat" in your home and let the lender PROVE they really are the "holders" of the note. Good luck with both of these folks! Just beware of paying in advance for these services as their "mods" may be insignificant but are "mods" and they wish payment. I had one guy bragging to me he got a $50,000 loan "mod" for a client. Of course the client was sideways to the tune of $250,000 but HEY, he modified the loan!!
You also need to fully understand YOUR situation. Getting a 1% reduction or going to Interest only payments or even a loan reduction may NOT keep you in your house. YOU need to analyze what it will realistically take to keep your home! The default rates are outlandish--25% and UP!! None of these alledged experts could sell ANY loan with a 25% default rate! So just be careful, get a second opion on anything you are asked to sign and then pin them down on the terms of the "Mod" and make it a contingent fee, or payable upon delivery of the loan "mod" IN WRITING by all parties! Good Luck!