Have a HAMPY holiday. (Sorry about the pun. It's Laws You Should Know About, Two.)

Today's Law You Should Know About: "HAMP," the Home Affordable Modification Program.

I don't know why this is not getting more press -- and why the companies that are part of it are not actually using it, but if you own your home, and are worried about getting in trouble on your mortgage, you need to know about HAMP. "HAMP" is the program the Obama administration put into effect. Any lender or servicer who (a) received government TARP money or (b) signed a contract with the government to abide by HAMP's rules -- and that's a lot of them, almost all of them, in fact -- has to abide by HAMP's rules, and HAMP's rules are these:

RULE ONE: A borrower who is in danger of missing a payment, or has missed a payment, must -- MUST-- be evaluated to determine whether they're eligible for the program. They're eligible if the home loan was taken out before January 1, 2009, they live in the house in question, the house is less than four units, and they owe less than $729,000 or so (for single-unit homes; the amount is higher for duplexes, triplexes, and quads.)

If the person meets those criteria, the lender or servicer must -- MUST -- evaluate to see whether the loan's payment is greater than 31% of their gross income. If it is, then

RULE TWO: The lender must-- MUST-- perform a value analysis and see whether it makes sense to modify the loan. If the house passes the test, then

RULE THREE: The lender must -- MUST-- modify the loan, first by reducing the interest rate to as low as 2%, then by extending the loan to as much as 40 years, then by deferring some principal; in other words, the lender must -- MUST -- lower your payments and offer you a trial modification.

If you get the modification, and make three consecutive payments, it becomes permanent.

AND, this is all FREE to you. There's no charge whatsoever, plus the lender has to forgive unpaid late fees.

AND, the lender can't -- CAN'T -- foreclose until they at least evaluate you.

So you can pay less, avoid foreclosure, and do it for free! You don't even need a lawyer; all you have to do is call your lender or servicer -- use the number on your bill -- and ask them for the "HAMP" program.

Learn more about it here, and if you're not sure your lender or servicer is part of the program, check here.

UPDATE: Read a follow up on NPV testing and a reader question, here.