The loss of a job, a sudden sickness, or a death in the family can happen at any time to a middle class worker and can prevent him from being able to afford his mortgage payment. Unfortunately, one missed payment can put you in default for your mortgage. The federal government and financial institutions recognize the negative effects of having foreclosed homes, and have established several programs to assist middle class families in retaining their homes and mortgages.
Home Affordable Modification Program
The Home Affordable Modification Program was enacted by the federal government to help with the mortgage crisis during the first decade of the 2000s. It is scheduled to end in December 2013, as of the date of publication. The program is only available for middle class workers and can lower monthly mortgage payments to 31 percent of a family's monthly gross income. To qualify for the program, you must use the home as your primary residence, you must have received the mortgage before 2009, you must have a mortgage payment that is greater than 31 percent of your gross income, you must owe up to $729,750 on the property, and you must have a financial hardship. Submit a Request for Mortgage Assistance Form, IRS Form 4506T-EZ or 4506-T, and a Verification of Income form to your mortgage provider to apply for assistance.
Mortgage Loan Modification from a Lender
Financial institutions will grant loan modifications to some customers if they meet the requirements that are established by the institution. These modifications may temporarily or permanently change your interest rate or the term of your loan to make it easier to pay your mortgage. Middle class workers may be required to provide check stubs, a letter that details a need for a modification in the loan, and tax returns. It is important to turn in all of the requested documents within the given timeline and to label each document.
Reinstatement or Repayment Plan
Some lenders will recognize that middle class workers may encounter a temporary setback and may not have additional funds to pay past-due mortgage payments. A lender may agree to a reinstatement, an agreement to receive the amount of past-due mortgage payments, fees or penalties by an agreed-upon date. Another option is a repayment plan in which the bank agrees to add a portion of the past-due balance to subsequent payments for a specific period of time. Ask your lender to consider these foreclosure alternatives.
In limited circumstances, such as a temporary disability or a job loss, a lender may agree to a forbearance. A forbearance allows you to live in your home while you are not making mortgage payments for a limited period of time. After the time lapses, you resume making your payments, and you may have to pay an additional amount to compensate for the months in which you were you not making payments.
Other programs may be available to assist you, depending on your location and your circumstances. For example, the Federal Housing Administration may be able to assist you if you have a subprime mortgage that has adjusted to a higher payment. You may also be able to refinance your mortgage into an FHA loan. The Department of Housing and Urban Development may be able to provide assistance to some borrowers, while the Homeownership Preservation Foundation provides counselors that can provide suggestion to you based on your particular situation.
Samantha Kemp is a lawyer for a general practice firm. She has been writing professionally since 2009. Her articles focus on legal issues, personal finance, business and education. Kemp acquired her JD from the University of Arkansas School of Law. She also has degrees in economics and business and teaching.