Financial Hardship

• If you're facing a financial hardship such as a job loss, reduction in working hours or a serious injury or illness that has kept you from working, you might be struggling to make your once-affordable mortgage payments. If this is happening to you, call your existing mortgage servicer --- the company to which you are sending your mortgage payments each month --- and ask for a mortgage modification. Be prepared, though, to prove that your hardship is severe enough to make your current mortgage payments unaffordable.
  
  

Proving Your Hardship

• Before approving your request for an in-house mortgage modification, your lender will first require you to write a financial hardship letter. This letter will explain, in detail, why you can no longer afford to pay your mortgage on time. If your spouse has lost a job, put this in the letter. If your employer has cut your working hours in half, write about that. Support your letter with copies of the financial documents that prove that your monthly income has fallen. These documents can include your most recent federal income tax return, credit card bills, work paycheck stubs, and bank savings or checking account statements.
  
  

The Process

• If your lender agrees that your financial hardship is severe enough, it can reduce your monthly payment in several different ways. It can reduce your existing mortgage interest rate, something that will cause your monthly loan payment to fall. It can also change the terms of your loan, perhaps turning your15-year fixed-rate mortgage loan into a 30-year version. You'll then have longer to pay off your home loan and, because of this, lower payments each month. Your lender might also decide to forgive a portion of your loan's principal balance. If you owe less on your home, your monthly payment will drop.
  
  

Turn to the Government

• The federal government has encouraged mortgage lenders to complete more modifications with its Home Affordable Modification Program. Under this program, the government provides a financial bonus to mortgage lenders every time they modify an existing loan. When you call your lender to ask for a modification, ask if it is participating in this program. If it is, it might increase your chances for a successful mortgage modification.