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    The Federal Government has put in place a number of programs designed to help homeowners avoid foreclosure (HAFA, HOPE, HFA) on a federal level and has also provided individual states with broad latitude to fine tune aid to what their citizens need.

    Lisa Madigan, the AG of Illinois, is focusing on providing Illinois citizens at risk of losing their home with practical information to help them help themselves. She recommends a three step process troubled borrowers should follow to improve their chances of keeping their home: 1) Gather Information, 2) Develop a Plan, and 3) Present the Plan. Let us review what this three stage process entails.

    If you are going through financial difficulties and are at risk of losing your home you are going to have to work hard to have a chance of saving your home. It is a good idea to view the work involved in avoiding foreclosure as your job; a job with excellent wages and benefits: a home for you and your family.
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    Gathering Information.

    Organizing yourself and knowing where you stand is probably the most important single step you can take to save your home. It will give you a clear picture of your situation and provide you with the arguments to present a solid case to your lenders. This information will also be useful for legitimate financial counselors when they assess your case.

    1.)    General Information.

    What kind of information will you need to provide?

    Your will need:

    a)      Your current mortgage payment.

    b)      Property taxes and homeowners insurance.

    c)       The date of the last payment you made (make sure you know what month the payment was for)

    d)      The number of months you are behind.

    What state are you in? Please select an item.

    Behind on your mortgage payments?: Please select an item.

    Estimated mortgage balance owed? Please select an item.

    Who is your lender? A value is required.

    First Name: A value is required.

    Last Name: A value is required.

    Primary Phone Number: A value is required.

    Secondary Phone Number:

    Your Email Address: A value is required.

     

    e)      All court papers and notices you have received.

    f)       Details on your loan: type of rate (fixed or variable), current interest rate (5%, 7%…), size ($100,000, $500,000…), length (10, 20, 30 years)

    g)      If your loan is an adjusted rate loan (ARM) when will the mortgage rate reset?

    Once you have this information you will have a more realistic view of your financial situation. Some homeowners are so scared about the possibility of losing their home they choose to ignore their situation and stick their head in the sand and pretend nothing is wrong until it is too late.

    With this information you can now go on to the next stage of gathering information: creating a budget.

    2) Creating a budget.

    Sit down and work out what your income is. Lenders will be very interested in this when they work out what payments you are able to make if they refinance or modify your loan.

    Write a report on your jobs and sources of income; make sure you include the time you have been employed, the consistency of the income, your gross and net income, government benefits, and any child support. Provide evidence for every source of income.

    List all your expenses. It is common to underestimate monthly expenses; be thorough and try to provide bank statements to back you claims. Include what you spend every month on food, utilities, clothing, insurance, medical expenses, transportation, pet expenses, charity, student loans, child care…

    At this point you should revise your budget and make sure you have documentation that supports your claims. Make sure you include recent mortgage statements, the last two months’ pay stubs for every working household member, tax returns for the last two years, bank statements for at least two months, and your current utility bills.

    After working hard gathering all this information you are now ready for the last step of this step: Writing your hardship letter.

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