Updated on March 26, 2009.

WITH THE SAGGING economy, writing that monthly mortgage check has gotten harder for folks at all income levels.

By the end of 2008, more than one million foreclosed homes were on the market, representing at least one-quarter of all properties for sale, according to RealtyTrac, a foreclosure tracking firm. And unlike in prior downturns, plenty of those are in affluent neighborhoods. Plunging property values have made it harder to determine the amount of equity homeowners have.

The good news is that banks are more willing than ever to help homeowners avoid foreclosure, and terms may improve further if President Obama's foreclosure prevention plan, which would allow four to five million homeowners to refinance into more affordable fixed-rate mortgages, gets through Congress.

Don t Wait Until You ve Skipped a Payment

Traditionally, you had to be behind on your payments for a bank to even consider modifying your mortgage. But nothing is traditional today. Bank of America (BAC), Citigroup (C) and JPMorgan Chase (JPM) which together service 37 percent of all mortgages in the U.S. announced plans last fall to contact select borrowers before they fell behind to see if they qualify for a loan modification. If you ve been laid off or your income has fallen, contact your mortgage servicer that is, whomever you write the check to and be prepared to document your claims.

Consider a Refinance

Refinancing might offer relief from high fixed-rate mortgages or adjustable-rate mortgages that are resetting to higher rates. You ll need at least 10 percent equity in your home; check the home-price calculators at ofheo.gov and Zillow.com to find a quick estimate of your home s worth. You ll also need a credit score of at least 720 to qualify for good rates; forget about any loan if your score is below 650. As always, compare a variety of offers, but sticking with your original lender may save you on closing costs.

Don t Despair

If you re willing to make your loan payments, you re already way ahead of the many borrowers who have walked away from their homes, says Moe Bedard, president of LoanSafe Solutions. The upshot? Banks have more incentive than ever to work with you. Plunging property values mean they re recovering less now on foreclosures. Plus, many that received cash infusions from the U.S. Treasury are under pressure to show that they re responding to the housing crisis. Take advantage.