Qualifying for a Mortgage Loan Workout Program

One common method that homeowners in foreclosureThe first is to show the lender that there is an
may have available to save their homes is to putemergency fund or extra cash in the bank that the
together an agreement with the mortgage companyhomeowners can use if they fall behind again. The
to repay the amount they are behind over a period ofsecond reason is to show the bank what kind of
time. This is called a forbearance agreement. Anotherspending habits the foreclosure victims have engaged
similar option is working with the lender to alter thein since falling behind. If they have been saving money
terms of the loan through a mortgage modification,or using their lowered income to keep on top of other
which may result in the missed payments being put onbills, then the bank will look more favorably on offering
the back of the loan, or the interest rate being lowereda payment plan or loan modification. However, if the
for a period of time. Both of these plans can givebank statements show that the homeowners have
homeowners an important opportunity to get back onbeen spending money on unnecessary items, such as
track with the mortgage, but lenders have strictfrequent shopping trips or online purchases, when they
guidelines that must be met to qualify for this type ofcould have been saving money to pay the mortgage,
program. Homeowners will have to fill out variousthis indicates to the lender that the homeowners are
forms and submit their personal financial documents inirresponsible with their money and will have trouble in
order for the bank to consider offering them one ofthe future paying the mortgage. Bank statements
these solutions. The importance of having theseshould also be recent and consecutive in order to give
documents completed and accurate can not bethe bank a more general overview of the
overstated, as banks may just let the file sit until thehomeowners' spending habits.
package is complete.The final documents that homeowners will need to
Possibly the most important document thepresent to the bank are tax returns for the previous
homeowners will need to submit is a hardship letter,two years. Tax returns show the lender that the
explaining how they fell behind and what they havehomeowners have generally stable income, but
done to recover from the hardship. They should alsosuffered from a temporary hardship causing them to
state how the problem has been solved so that itfall behind. This is important, because it serves as
does not recur in the future. This gives theevidence backing up the claims made in the hardship
homeowners an opportunity to describe the crisis asletter that the crisis was involuntary, unavoidable, and
beyond their control, such as sudden medical problems,uncommon, although it has not been rectified. Simply
a death in the family, divorce, or job loss, among otherfiling tax returns also shows that the homeowners are
possibilities. Often, the hardship letter can containnot trying to get out of paying their federal income
various solutions that the foreclosure victims aretaxes and shows that they were not just trying to get
proposing the bank consider, as well as statementsout of paying their mortgage for a few months. But
that they will be able to pay the mortgage on timethe actual financial data will be most important, as a
from now on. The hardship letter is the toolstable or increasing income will prove to the lender that
homeowners use to make their case to the mortgagethe homeowners are generally financially stable over
company of why they should not be foreclosed on,the longer term.
but given another chance.Besides these documents, lenders will often have their
Another important piece of the financial puzzle for theown forms and financial status reports that must be
bank is recent paystubs, showing how much thefilled out. But homeowners who are working with their
homeowners earn. The mortgage company will wantlenders, or working with a loss mitigation company to
to evaluate whether or not there is a strong possibilitydeal with the lender for them, need to be aware of the
of the loan being repaid in the future. A current stableimportance of having these documents. Without all of
income is one of the best ways they can decide howthem, the mortgage company can not make the most
much the homeowners can reasonably afford, andinformed decision possible about the current state of
how long the payment plan term should last. Obviously,the foreclosure victims' finances, and they will turn
since the foreclosure victims are attempting to paydown the proposal for a repayment plan or loan
their normal payment as well as a portion of themodification. It would be a tragic occurrence if the
arrears every month, the lender will have to make surehomeowners lost their homes to foreclosure simply
this does not take up too much of the homeowners'because they did not have this information readily
income. If the repayment plan is too expensive, theavailable to be submitted to the lender. Thankfully, loss
loan will go back into default and foreclosure. Themitigation companies and the banks provide checklists
paystubs should show income over at least a periodto the homeowners to make sure they have
of one month, and they should be recent andsubmitted everything necessary, but a failure to read
consecutive. Submitting one from August and anotherand comply with these documents will typically result in
from November does not show a stable income.a failure to save the home.
Bank statements are also important, for two reasons.