These programs are designed to keep people in their homes and typically cover homeowners that have overextended themselves with credit, lost a job or have seen their home values plunge.
Definition
A mortgage hardship program may be offered by your lender. Such programs may make it possible for you to switch your current adjustable rate mortgage to a fixed rate mortgage or take some other measures to preserve home ownership.
Action
To receive hardship consideration, you may need to draft a letter to your lender explaining your circumstances. You will want to obtain the name, title and address of the person that should receive your letter. Explain very clearly why you are seeking relief from your lender — provide a copies of a doctor’s letter, an insurance claim, recent pay stubs or a hospital bill to state your case. Be specific and, yes, it is fine to look for sympathy. Send your letter out by certified postal mail, receipt requested.
Credit
You can aid your cause by pulling up your credit reports to determine that your credit problems have been recorded by the credit reporting bureaus. Chances are your credit score has taken a hit too — obtain your score to make your case. Get free copies of your credit reports from AnnualCreditReport.com.
Debt
How much debt do you owe in relationship to your income? Use a debt-to-income ratio calculator to find how much your recurring monthly debt is to your gross monthly income. For instance, if your monthly debt is $1,700 and your gross monthly income is $2,900, then your debt to income ratio is 59 percent. Your lender may intervene only if that ratio is above 50 percent.
Application
Your lender may handle your hardship in any number of ways including:
1. Your loan may be converted from an ARM to a fixed interest rate mortgage.
2. Your monthly payments might be cut temporarily and the difference added to the end of your loan.
3. Your lender may grant you a temporary reprieve of let’s say six months to allow you to get your financial affairs in order.
4. Your lender might modify the entire loan or grant you a new one.
Foreclosure
If you have fallen behind on your mortgage, you are at risk of foreclosure. Notify your bank immediately to explain your situation. A lack of communication could be construed as avoidance, worsening an already difficult problem.
See Also — What Are My Mortgage Options?
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