If you're struggling to make your monthly mortgage payment, you're far from alone. Foreclosure data website RealtyTrac.com reports that a record 2.8 million property owners received foreclosure filings in 2008. If you are struggling with your mortgage loan, you may find financial relief from the federal government. The government's mortgage loan bailout, better known as the Home Affordable Modification Program, encourages mortgage lenders and banks to modify the loans of struggling homeowners, replacing them with new, reworked loans that these owners can afford. To qualify for one of these modified loans, though, you'll have to prove that you've suffered a financial hardship that makes paying your mortgage bill impossible.
Gather the evidence that you'll use to prove to your lender that you can no longer afford your mortgage payment. To do this, make copies of the financial papers that show that while your gross monthly income has fallen, your monthly debt obligations have not. These papers include your two most recent paychecks, your current W-2, bank savings and checking account statements, credit card bills and other loan statements, including those from personal, auto or student loans.
Write a financial hardship letter. This letter explains why you can no longer afford to make your monthly mortgage payment. You might have lost your job. Maybe your employer has cut your weekly working hours or eliminated overtime. Maybe you've suffered a serious injury that has kept you from working at all. Whatever the reason, include it in your letter. Also include a request to have your home loan modified into a new loan with smaller, more affordable monthly payments.
Log onto the home page of the Home Affordable Modification Program (see References) and determine if you are eligible for a modification through the program. To qualify, the amount you owe on your first mortgage loan must be $729,750 or lower, and you must have acquired this loan no later than Jan. 1, 2009. You must be struggling to make your payments, and your loan payment must total more than 31 percent of your gross monthly income.
Call your mortgage lender and, if you meet the qualifications of the Home Affordable Modification Program, explain that you'd like to have your existing mortgage loan modified into a new one with lower payments. Explain that you have suffered a financial hardship, and tell your loan officer exactly what that hardship is.
Send your lender the copies you made in Step 1 and the financial hardship letter you wrote in Step 2. Your lender will then consider whether your financial situation is severe enough to warrant a modification to a new mortgage loan. Your lender might reduce your loan's principal balance, lower its interest rate or restructure its terms, all of which can lower your monthly mortgage payment to an affordable level.
Even if you don't meet the qualifications of a Home Affordable Modification Program modification, you might still be able to gain financial relief from your bank or lender. Banks are allowed to modify loans at their own discretion. They don't have to participate in the government's bailout program to do this.
- Making Home Affordable: Eligibility
- Bankrate.com: Mortgage Modification
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- Even if you don't meet the qualifications of a Home Affordable Modification Program modification, you might still be able to gain financial relief from your bank or lender. Banks are allowed to modify loans at their own discretion. They don't have to participate in the government's bailout program to do this.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.