Providing Proof of Hardship | Loan Modification Part 3

After you determine you’re eligible

If medical expenses are making it tough for you to pay your mortgage, you could get help from the feds.

If you’ve read Part 1 and Part 2 of this series, you should already have a pretty good idea of whether you are eligible to take part in the federal Foreclosure Prevention Plan.

You also know that part of the process is including proof of hardship. This article in the Loan Modification series will discusses what that means.

The List

Federal officials have said only “at risk” homeowners can get government assistance. Applicants must prove one of these:

• serious hardship
• declines in income
• increase in expenses
• facing an interest rate hike
• high mortgage debt compared to income
• they owe more than their house is worth
• reasons for being close to default

Serious hardship

If you have had huge medical expenses or other emergencies that have hampered your ability to pay your mortgage, you can use these to appeal for government assistance.

Get all the documentation you can. Hospital bills, documentation of child support payments, proof of a car accident that left a vehicle totaled, other personal loans or financial statements from business owners are a few examples.

Income declines, expense increases

If you have taken a pay cut or been laid off, you could be eligible for help. Make sure you gather severance agreements, unemployment pay stubs and any other documents that prove your situation.

Likewise, if you’ve had serious increases in essential expenses, gather documents that show that. Perhaps you’ve had a child or your electricity bill has gone way up because of rate changes.

Current mortgage situation

Most importantly, you must have all of the documents that show your current mortgage agreement. If your house has declined in value and is now worth significantly less than the purchase price, get an appraiser to confirm and document that.

Odds and ends

If your mortgage is more than 31 percent of your income, you are a good candidate for the foreclosure prevention plan. If you have any other factors that are restricting your ability to pay your mortgage, plead  your case. You can write a letter or include any other documents that show you’re facing hardship.

To find out the details on how loan modification works, check out Part 4.