A new government housing bill  may help you and about 3 million other troubled homeowners avoid foreclosures through loan modifications, according to administration officials.

The housing rescue bill may use about $50 billion of the $700 billion bailout funds to guarantee your mortgage. It aims to encourage lenders to lengthen loan terms and lower interest rates for a five-year period so that you can have lower mortgage payments.

Loan modification works by adjusting certain terms in your loan. Your lender can reduce the principal loan balance or interest rate. They can even extend the life of the loan, giving you more time to pay off your debt. Lenders are more willing to work with you on this because it would cost less than having to go through a foreclosure process. For this reason, it is important that you contact your lender at the earliest sign of trouble.

According to the Mortgage Bankers Association, more than 4 million homeowners are already at least one payment behind their mortgages and that 500,000 were facing foreclosure, which makes the need for mortgage help necessary.

The Federal Deposit Insurance Corp. would be tasked to run the new federal housing bill in the making. It is by far the biggest effort made by the government to reduce the damages of the housing collapse that has affected global financial markets.  Should it push thru, many Americans will be saved from their financial woes.

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