What Is a Hardship Mortgage?
For homeowners hit by rising interest rates or financial difficulties, a hardship mortgage can save their home from foreclosure. The federal government instituted the Home Affordable Modification Program, or HAMP, to assist homeowners who are having difficulties making mortgage payments on their primary residence. The U.S. Treasury provides incentives to participating lenders to lower interest rates and pays the lenders $1,000 to $1,500 for each modification the lender accepts. Lenders also receive $1,000 per year for modifications that do not become more than 90 days past due.
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Eligibility
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To qualify for a hardship mortgage through HAMP, you must live in the home the majority of the time and owe no more than $729,750 on the first mortgage. Your payment, including escrow payments, must be more than 31 percent of your monthly gross income, and your financial difficulties have to be due to unemployment or medical bills. It is important for qualified homeowners to contact their mortgage lenders early when they see they are having a hard time making ends meet, the Federal Trade Commission recommends.
Contacting Your Lender
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When you contact your lender to request a loan modification, be prepared to provide documentation regarding your monthly gross income. Acceptable documentation can include pay stubs and income tax returns. You will need to gather your banking statements, mortgage statement and any information about other assets and debts before you call your lender. The government provides forms that will assist you in submitting your information. These forms include a request form, a tax form and a proof of income checklist.
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Request Form
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The request form, also called a hardship affidavit, informs your lender of your need for assistance. The questions on the form will help your lender verify that you are in need of help and provides you with the opportunity to explain the reason for your request. It is imperative that you fill out the form completely and honestly and that you have all borrowers listed on the mortgage sign the form.
Mortgage Relief Fraud
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The Mortgage Assistance Relief Services Rule, instituted by the Federal Trade Commission, says companies that assist distressed homeowners cannot take fees until the homeowner accepts an offer of relief from the lender. Many companies offer to help homeowners by advertising that the company can stop foreclosure or negotiate loan modifications, with a guarantee that it can save your home. But some companies defraud customers, taking their money and leaving them in worse shape than when the homeowner contacted them, the FTC says. It recommends that homeowners find a credit counselor by calling the Homeownership Preservation Foundation, 888-995-HOPE. The counselor can offer advice on avoiding a foreclosure (see Resources).
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