Financially strapped homeowners who are close to foreclosure may want to face the music now rather than continuing to struggle with their monthly payments. There's a high probability of losing the house anyway, even with the government's help.

According to a new report, people who take advantage of a key federal program to modify their mortgages in an effort to save their homes are defaulting "at an alarming rate."

The report from the special inspector general for the Treasury Department's Troubled Asset Relief Program doesn't say why an inordinately high percentage of owners who take part in the Home Affordable Modification Program, or HAMP, are unable to maintain their loan modifications. The report only says that the longer owners remain in the program, the more likely they are to default again.

Even with permanently reduced loan payments, the number of owners who are "redefaulting" is rising, the inspector general says.

At the end of the first quarter of 2013, the report found, nearly half of the oldest of the HAMP modifications, from the third and fourth quarters of 2009, are going back into default.

Specifically, 46 percent of the HAMP mods made in the third quarter of '09 redefaulted and 39 percent flunked out in the fourth quarter. Even mods from 2010 had high failure rates, ranging up to nearly 38 percent, the report says.

As of March 31, of the 1.28 million owners whose loans were modified under HAMP, more than 312,000 have gone into default again. And when that happens, the consequences are severe.

Owners who cannot sustain their reworked loans and fall out of HAMP are left with the terms of the original mortgage. And as such, they are responsible for making up the difference between the original loan payment and the lower HAMP loan payment.

Not only can the back payment be substantial, the inspector general advises, but already-distressed owners can be hit with late fees on both the principal and interest that weren't paid during the modification period.

In some instances, the report cautions, redefaulting borrowers can end up owing more than they did before their loans were modified.

The Obama administration's signature housing support program, HAMP was created in 2009 to help owners avoid preventable foreclosure by encouraging the companies which administer their mortgages -- so-called loan "servicers" -- to find ways to lower their payments.

Under the program, which was recently extended until Jan. 1, 2016, borrowers with loans made prior to 2009 whose monthly payments for principal, interest, taxes and insurance are more than 31 percent of their gross income are eligible. Generally, servicers reduce the borrower's interest rate or extend the loan term to bring the payment down to an affordable and sustainable level.

As a last resort, but only with the agreement of the investor that owns the loan and is the ultimate recipient of the principal and interest you pay every month, servicers may also forgive some of the amount still owed on the mortgage.

But HAMP doesn't subsidize troubled borrowers. Rather, it provides financial incentives to mortgage servicers that work with borrowers. More than $4 billion of the $7.3 billion in federal funds spent on housing support programs during the housing crisis was spent under HAMP alone.

That raises the question of whether some servicers may be modifying loans they know will eventually fail anyway just to earn fees from Uncle Sam. No one seems to have addressed that issue. But previous research discovered some interesting findings.

For example, a study a few years back from the Federal Reserve Bank of New York found that, pre-HAMP, servicers focused on particularly risky borrowers with lower credit scores, higher debt-to-income ratios and loans with higher original loan-to-value ratios. Thus, the people most likely to fail with or without some kind of relief.

The New York Fed also found that the greater the payment reduction, the less the rate of recidivism. But many loan mods don't lower the payment. Rather, many result in higher payments and higher balances because the payments owed plus any penalties and fees are added to the outstanding balance without changing other terms of the loan.

On the other hand, the study found that the lowest redefault rates occurred when the payment reduction was paired with principal reduction. In other words, the servicer agreed to forgive some of what was owed. When their principal is reduced, the study found, problematic borrowers are four times less likely to default again.

Other studies from the University of North Carolina and the Boston and Atlanta Federal Reserve Banks had similar findings: There's a high correlation between redefaulting and loan mods in which your payments are stretched out and your debt is deferred -- but not reduced.

So the message for underwater borrowers considering a loan modification is this: Unless your servicer offers to rework your loan in such a way that you no longer owe more than the house is worth, think hard about what you are doing.

Is there a real chance you can save your house? Or are you merely putting off the inevitable?

"Anything you say can and will be used against you in a court of law." -- Miranda warning given by police to criminal suspects

Sellers talk too much. And when they do, they often talk themselves out of a lot of money. So, sellers: Keep your mouth shut and allow your agent to serve as your mouthpiece.

It's not that you are trying to hide something from would-be buyers. With today's disclosure laws, everything materially wrong with a home is going to be revealed to the other side, anyway. If it's not, you're asking for trouble.

At the same time, though, if you ramble on with a prospect or even his agent, chances are you will give up some information that the other side can use to gain a negotiating advantage.

Say you are about to close on your new house and need the money from the old one. Or your daughter is about to have a baby and you want to be out before the blessed event. Or maybe you are flexible on your price.

Make any of those things known in what you think of as passing conversation, and you've just reduced your chances that a buyer will come in with a strong offer.

"It's amazing how much of a disadvantage sellers can put themselves in," said Christine Donovan of the Donovan Group in Costa Mesa, Calif., on the real estate website ActiveRain.

The topic comes up often in the ActiveRain chat rooms, and the gist is usually that agents MUST read their sellers their real estate Miranda rights, sometimes prior to every showing.

Most agents working with buyers love it when sellers strike up a conversation with their clients. Pretty soon, they establish a bond -- maybe they went to the same college, or they have the same number of children. And then, before you know it, the seller wants the "nice young couple" to have the house.

That's when the classified information dam breaks. The seller will disclose the lowest price they're willing to take, or that they are getting a divorce and have to move right away. Often, everything and anything a buyer can use to his advantage in determining what he wants to offer can come spilling out.

Some sellers don't stop there. They also might divulge that they hate the neighborhood or the schools, or that the local kids are annoying. If that's the case, what makes anyone think someone else would want to live there?

The message should be clear: Take a vow of silence, even with other real estate agents. After all, speaking with them is just like speaking to the buyer. "Being silent is the best negotiation skill one can have," Mike Yeo of 3:16 Team Realty in Frisco, Texas, advised in one ActiveRain discussion. "Just shut up!"

Some buyers' agents are slick. They try to engage the seller in innocent conversation. It might seem like idle chatter, but the good ones have ways to get information out of sellers -- information that only the seller's agent should have.

This is why agents recommend that sellers leave the home when it is being shown. That way, there's no chance of something slipping out that shouldn't. If you can't leave, gather the family in front of the TV and don't move. Acknowledge the visitors' presence, but otherwise be quiet.

Besides the possibility of showing your hand, Jennifer Fivelsdal of JFIVE Realty in Rhinebeck, N.Y., commented recently, any interaction makes it hard for the buyer to focus on the home's features -- making you less likely to get an offer.

Buyers frequently run at the mouth, too, and the information they spill -- like how high they can go -- is just as damaging to their cause. "A $10 muzzle would have saved them $15,000," commented Doug Rogers of Century 21 Millennium in Pineville, La., of past clients.

"I have to admit: As a listing agent, I've been on the receiving end of buyers talking too much," said Mel Peterson of the Real Estate Cafe in Grants Pass, Ore. "It was quite helpful when we went into a counter situation and I was able to share with my sellers how badly the buyers wanted their home."

So buyers, too, should take a vow of silence. "Buyers are meant to be seen, not heard, especially when viewing a house," said Gary Waters of Century 21 Baytree Realty in Rockledge, Fla. "They need to share between themselves and their agent, not the seller's agent."

If buyers and sellers must speak to one another, they should try not to show any emotion. And keep your comments -- good or bad -- to yourself. Only when buyers leave the property should the discussions begin about what they liked and disliked about the place.

"I always say to keep your cards as close to your chest as possible," said Yvonne Burdette of Rhoads Real Estate in Springfield, Mo. "Every word is a commodity you should not give, sell or trade."

Did you hear about the loan underwriter who demanded a letter from the borrower's doctor stating the borrower had been healed and his illness would not come back? How about the underwriter who wanted a verification of employment from the borrower who listed her occupation as "homemaker"?

Yes, things are tough out there. And despite some evidence that lenders are easing up just a tad, in the new world of "prove everything -- and prove it twice," there have been some unusual demands, to say the least.

For example, lenders like to determine the source of funds that are deposited into applicants' accounts. They want to make sure that money for a down payment is the applicant's, as opposed to loan from a friend, relative or other lending institution.

That makes sense. After all, if it's not the borrower's money, he has no skin in the game. And it becomes too easy for him to walk away from the mortgage later if he should not be able to pay as promised. Or he might not be able to afford to pay back two loans, one from the bank and the other from some unknown entity.

But in one case, the underwriter -- the person who is responsible for reviewing all documentation for your loan to make sure it conforms to the lender's requirements -- asked for a letter of explanation on a $6 deposit from a borrower who earned $10,000 a month. And in another instance, a borrower who had deposited $235 from a garage sale was asked for an ad proving she did, indeed, have the sale.

Yes, despite the need to know, some requests are just plain ridiculous.

"Absurd," says Karen Deis, who operates MortgageCurrentcy.com, a website that keeps loan officers, processors and underwriters current on the ever-changing regulations and guidelines for FHA loans, VA loans, Fannie Mae and Freddie Mac.

"I don't know whether to laugh or cry," says Deis. She collected these and dozens of other anecdotes on her Facebook page after asking her clients to report the most absurd conditions they have seen. "People are scared. All you hear about are buybacks, audits and people losing their jobs" because they didn't verify this or confirm that.

These silly requests notwithstanding, Ellie Mae, the electronic mortgage processing system, reports that the average FICO scores of closed loans fell slightly in March, for the second month in a row -- from 745 to 743. That's the lowest since Ellie Mae began tracking loan profiles.

But according to FICO, the company that builds the algorithms on which the all-important credit scores are based, only 37 percent of all people with credit records have a FICO score above 750. That doesn't mean the other 60-plus percent didn't have a score high enough to obtain a mortgage. Rather, as Ellie Mae president Jonathan Corr explains, his company's benchmark is an average, so people with lower scores are obtaining financing. But they have to jump through hoops to do so.

"Even though there has been some loosening," Corr says, "what they're asking of people is not changing. It's still pretty comprehensive, and we're going to continue to hear stories like this."

With that in mind, then, would-be borrowers should be ready for anything, as these other unusual underwriting requests collected by Deis demonstrate:

-- A borrower who had been out of school for several years was asked to produce his high school transcript.

-- The underwriter asked for proof that the borrower was no longer under house arrest.

-- The underwriter wanted a letter explaining why the year-old child listed on the application was not named as a dependent on the previous year's tax return. Then, when the borrower wrote back that the child was not born until after the tax return was filed, the underwriter wanted a copy of the infant's birth certificate.

-- A borrower was asked for a death certificate for her recently deceased husband PLUS a letter explaining why her social security benefits had been reduced.

-- The borrower, a teacher at a Catholic high school, was asked for a letter testifying the school was part of the local Catholic school system.

-- A single father who had custody of his child was asked for a letter saying he did not have to pay child support.

-- The underwriter wanted verification that the borrower, who had written a $167 check to a local grocery store, did not have a loan with the grocer.

-- An updated appraisal was requested because the picture accompanying the original one was deemed too old. It must be old, the underwriter reasoned, because the evergreen trees in the background were still green and it was the middle of winter.

-- The underwriter demanded a letter from a borrower explaining why she changed her name after she married.

-- A borrower was asked for proof that he does not own a home he sold a decade earlier.

-- The underwriter wanted a letter from the U.S. Postal Service verifying that the borrower, whose mailing address was a post office box, actually owned the 10-inch box and that it was the borrower's primary address.

-- A borrower who worked for a well-known major company was asked for a letter explaining why his office was in a different location than the headquarters address listed on his pay stub.

-- A borrower who listed her occupation as "prostitute" and declared her income on her tax returns was required to obtain affidavits from her regular customers saying they were, indeed, her clients.