When you contact a mortgage servicer or housing counselor to discuss a mortgage workout to avoid foreclosure, here is a list of documents you should have on hand and facts that you should know. (You can download the work sheet here.) If there are two borrowers, you should collect financial information such as pay stubs for both people.
Documents to have ready
- Loan account number
- The promissory note, if you have it
- Date of your last mortgage payment
- Amount past due
- All letters from your lender regarding your past-due status
- Your own documentation of any phone calls you made to the servicer, who you talked to and what agreements were reached
- Any letters from attorneys, courts or the sheriff's office
- Coupon book or most recent monthly mortgage statement
- Name of the broker and/or original lender
- Homeowner's insurance policy, account number and name of insurance agent
- Last two months' pay stubs
- Proof of other income, such as alimony, child support and disability
- Last two months' bank statements
- W-2s and tax returns from last year
- Your best estimate of how much you could reasonably afford for each month's house payment
- If the mortgage servicer has made an error, a description of the mistake.
The hardship letterFinally, and importantly, you should write a brief, factual hardship letter explaining why you fell behind on the monthly payments. End the hardship letter by suggesting what you think is a fair, reasonable resolution to your case -- anything from a six-month repayment plan to a reduction in interest rate.
Be specific in the hardship letter, advises James Jones, foreclosure prevention director for the East Side Organizing Project in Cleveland. If you had to miss weeks of work because of illness, specify what illness and why you couldn't work.
"Don't just say, 'I got sick,'" Jones says. "You have to expound on it. You have to paint a picture ... You want the person who reads this, if they don't shed a tear, it at least puts a lump in their throat." But don't exaggerate.
As far as suggesting a resolution, Jones says: "Keep in mind that you signed the contract. Keep in mind that you owe them money. This 'fair and reasonable' has to be something that's acceptable to the mortgage company and doable by you." One benefit of working with a counselor at a nonprofit housing agency is that the counselor can gently bring you back down to Earth if your expectations are unreasonable.