President Obama had two separate intentions when he signed the Home Stimulus Plan. He wanted to boost the sagging housing market and also to reach out and assist troubled homeowners who were facing foreclosure in record numbers.

Loan modifications are the tool used to help people avoid foreclosure. Under this program, the banks receive thousand dollar incentives to do these loan modifications. They take an existing mortgage loan that has become unaffordable to a homeowner and rework it so that the house payments are much more affordable. The target payment is less than 31% of the homeowner's gross monthly income.

Homeowners who qualify for this program may quite possibly be in default already on their mortgage and very close to foreclosure. Late fees have often begun to accumulate. Without this federal rescue, most of these homeowners would be destined for foreclosure, no doubt. The loan modification unravels the ever increasing financial obstacle that would normally require a very large lump sum of money to settle. By reworking the loan into new terms, the homeowner's dilemma is solved. Common sense tells you that they do not have the expendable income to sustain an extra payment on another loan. And obviously, they don't have access to a large amount of money or they would probably not be in this precarious situation.

Under the Home Stimulus Plan, banks and lenders can use several ways of restructuring to arrive at a lower monthly payment for the homeowner. If the homeowner is able to make the new payment on time for a year, they receive a $1000. reward. This is available for the first five years, and this money applies straight to the principal.