The Application Process for a Hardship Mortgage

If you are facing foreclosure because of a temporary set back such as loss of employment or medical emergency, you can apply for a hardship mortgage. All lenders have a mortgage hardship program.

Hardship Programs

Under the lender’s hardship program, the lender can change the terms of your loan to make the payments more affordable. In the long term, your lender can help you out in the following ways:

• Your lender can capitalize delinquent payments on top of the present principal balance and allow you to repay these delinquent payments slowly over the whole term of the loan. 
• Give you more time to repay, in installments, the delinquent amounts, with no interest accruing on these back due amounts;
• Lower the interest rate for a certain number of years or even for the remaining term of the loan, thus reducing monthly payments without lengthening the term of your loan;
• Lengthening the term of your loan but increasing the total interest payments over the term of the loan thus reducing monthly payments;
• Substituting some other more valuable property or asset for your home as collateral for loan, thus putting the substitute property at risk of foreclosure, but protecting your home; or
• Some combination of the above forms of loan restructuring, such as allowing back payments to be paid gradually, lengthening the term of the loan, and lowering interest.

Application

Timing is very important if you are facing foreclosure. If you are seeking hardship assistance from your lender, you should apply as soon as possible. It is best to apply before you are more than two months in default. Contact your lender and request them for information about their mortgage hardship policy.

All application for mortgage hardship must be accompanied by a hardship letter explaining the reason for your default. You should be able to explain the following:

• Reasons for you to fall behind in your monthly payments – loss of job, unexpected medical expenses, etc
• Your current resources – monthly income, benefits, savings and investments
• Your other liabilities, debts and expenses – food, utilities, insurance, loan payments, credit card payments, etc
• Your repayment plans – this will have an impact on how the lender will help you.

Documents

Your application must be accompanied by your financial information. Generally the lender will require the following documents:

• Duly signed hardship letter
• 2 months of pay stubs for employed borrowers or Year-to-Date Profit and Loss Statement for Self-Employed Borrowers
• Social Security Income (Award Letter) for Spousal and/or Child Support Income
• Complete bank statements for the last two months
• Current Homeowners Insurance Policy
• Current and/or Delinquent Property Tax Information
• Purchase Agreement

Get Legal Help

If you are experiencing or have recently experienced a hardship and are unable to keep up with your mortgage payments contact an experienced foreclosure attorney. An experienced attorney can study your lender’s hardship program and inform you about your options.