To provide a more thorough answer, I'll cover 3 areas: (i) problems with people being told to skip payments, (2) some of the available government programs, and (3) an unofficial source I provide for the math
Skipping payments. A number of US government agencies [such as: OCC; FDIC; SIGTARP ] now warn borrowers against stopping their payments. The Federal Trade Commission has enacted rules requiring certain "professionals" who advise a borrower to stop making their payments to also explain the consequences. Basically, a borrower who stops making payments will likely lose the house and damage their credit report.
"Dual Tracking" is the practice of starting foreclosure proceedings while the borrower is also trying to obtain a loan modification. To get the loan mod, and the foreclosure proceedings "that don't mean anything because we are doing a loan mod" [lie] going, there are anecdotal reports on YouTube that borrowers have been told to skip a payment [search Youtube for "loan mod hell"].
According to this realtor's blog, Dual Tracking will be illegal in California starting 2013.
Government Programs See makinghomeaffordable.gov for toll free numbers, FAQs, etc.
- HAMP Reduces interest rates, lengthens the loan, and adds principal forgiveness or a balloon payment for borrowers in imminent danger of default. That criteria sounds good, but is actually rather vague. HAMP has had execution problems (see Youtube again: "loan mod hell") and has become more complicated over time (with/without Principal reduction, Tier 1/Tier 2). I'll say a bit more on the math of HAMP below.
- HARP refinances "underwater" loans, within limits. Underwater means more is owed than the home is currently worth. Imminent danger of default is not required. The borrower must be current on payments. I believe Fannie and Freddie mention this program outperforming HAMP.
- HAFA is a foreclosure alternative. A "cash for keys" type of program for people who want to walk away from their house.
- There are some new programs for the unemployed.
The Math of HAMP The government's web site at makinghomeaffordable.gov provides a quick two input calculator for HAMP. Basically it will show you that the HAMP target payment for the borrower is 31% of gross income, and how much could be saved. This neglects many details of the program. There is a sequence of steps called a "waterfall" that provides the suggested HAMP modification. Because this suggested modification can be overly generous, there is a NPV test that acts as a veto over the suggested modification. These are detailed in public documents such as the MHA Handbook and earlier, in Treasury directives. I have created a free Unofficial HAMP Loan Modification Calculator that allows visitors to explore the HAMP math, obtaining immediate calculations for the waterfall portion. No email address or personal info is required, and source code to the calculator is also provided (GPLv3). So far it does Tier 1, with/without Principal Reduction, and with/without Lender's Alternative Waterfall for Prinicpal Reduction, based on the MHA Handbook. I hope to add Tier 2 some time in the future. Feedback is appreciated.