Loan Modification

FHA Loans: Get Help Before Missing Mortgage Payments

By Karen Lawson

Homeowners anticipating difficulty making mortgage payments on their FHA loans should contact their mortgage lenders to discuss relief options. FHA guidelines do not require being behind on payments as a condition for getting assistance, but to qualify for help, you must be able to demonstrate a loss of income caused by the following:

• Reduced earnings due to cut in hours or pay
• Loss in self employment income
• Long term illness or disability impacting income
• Income loss due to death in family

It’s important to contact your mortgage company or a HUD approved housing counseling agency as soon as your circumstances change; don’t wait until you’ve missed a mortgage payment. Your lender or counselor will require documentation of your hardship, which may include:

• A signed letter explaining the cause of hardship and requesting assistance
• Documentation of hardship including notice of layoff, reduced wages, or cut in hours worked
• Copies of recent pay stubs or direct deposit receipts
• Copies of most recent bank statements
• Documentation of itemized monthly expenses
• Copies of most recent tax return

Your lender may require more or less information, but it’s essential to submit requested items without delay. Depending on your situation, you may qualify for any of several relief options.

FHA Mortgage Relief Options

FHA approved relief programs can help you avoid foreclosure when facing a temporary or permanent reduction in income. Your lender will review your circumstances,and may offer the following solutions:

• Temporary forbearance: This allows homeowners facing a temporary reduction of income to forgo making mortgage payments for a specific period of time. When the forbearance period expires, the interest portion of the payments not made are added to the mortgage loan.
• Modification of loan terms: If you’re experiencing a permanent hardship created by reduced income, you may qualify for a modification of your mortgage loan. Possible methods of modifying your loan include:
• Reducing your mortgage rate: Lowering mortgage rates reduces monthly P&I payments and helps with paying off your mortgage loan faster.
• Extending loan repayment term: Mortgage lenders may offer to extend your repayment term; this lowers monthly payments, but adds to the interest you’ll pay over time.
• Mortgage write downs:This means lowering the amount of your mortgage; this may occur in cases where a permanent disability or death of a primary borrower prevent a family from making mortgage payments under the terms of the existing mortgage. Mortgage write downs are typically a relief method of last resort.

HUD approved mortgage lenders and loan servicing companies review each case on an individual basis using FHA guidelines; your mortgage company may combine relief options to achieve affordable mortgage payments.

Full post as published by FHA Mortgage Guide on March 22, 2010 (boomark / email).