Important Financial Documents a Homeowner Needs

By: Nef Cortez

Once a homeowner in foreclosure begins working with his lender, he or
she will be asked for several financial documents in order to assess
the homeowner's current situation, what was the cause of the default
and what type of workout can be accomplished. The reason a homeowner
needs to provide this information is in order to determine what their
available options are based on their current financial situation.

A successful foreclosure workout that enables the homeowner to keep
the property is dependent on the lender being able to determine that
the homeowner suffered a financial hardship and through the financial
paperwork provided will have the financial capability to be able to
keep the loan current. Other options that may be available for a
successful workout involve a pre-foreclosure sale or Deed In Lieu of
Foreclosure which will be dependent on the lender being able to
determine there was a financial hardship, but due to a homeowner's
current circumstances, foreclosure is inevitable.

Most lenders will require the following documents as the minimum for
considering a loan workout, and many lenders will not consider a
workout until the loan has been delinquent for at least 90 days. This
is why it is important for the homeowner to contact his or her lender
to find out the particular guidelines that their lender uses.

Hardship Letter

This letter describes the hardship that caused the loan to go into
default and describes your preferred solution to bring the loan
current. The hardship should be involuntary, such as divorce, job
layoff or medical reasons. This letter will also include your proposal
for a workout and the reason you are confident the workout plan will


One or two current paystubs from each person occupying the property
who is contributing to the payment of household expenses. The lender
will use this to determine the feasibility of any repayment plan, or
whether to determine foreclosure is inevitable.

Tax Returns

If the homeowner is self-employed, these types of borrowers will need
to provide the last two years tax returns along with a current profit
and loss statement. Many self employed borrowers don't receive
paystubs, the lender will use the tax returns to determine income

Financial Statement

The lender will ask for a financial statement outlining all of your
income, assets and liabilities. This statement provides a "snapshot"
of your financial situation allowing the lender to determine how the
economic hardship can be overcome. In addition, many lenders also ask
for a monthly expenses worksheet this includes other debt obligations
such as credit card payments, utilities, food, etc. Make sure that as
a homeowner you make a diligent effort to give an accurate estimate of
your monthly expenses. It would also be advisable to begin to cut
some of your discretionary expenses in your monthly budget.

The more organized the homeowner is in this process, the better the
homeowner will be able to handle the myriad of questions that he or
she will have to undergo with the lender. One key thing to remember
if the homeowner is attempting to complete a workout without outside
assistance is to submit ALL of their paperwork together as a package.
Be sure to keep copies of everything and document when they were sent.

In addition, a homeowner should keep a notebook to record or summarize
any and all conversations or documents sent to anyone that he or she
discusses or communicates with regarding the loan. This information
can later be helpful in the event that there are any miscommunications
and/or a homeowner may need to hire a lawyer.

The homeowner's lender needs all of the above information to be able
to determine which type of workout may be appropriate. Once that is
determined, the lender will communicate with the homeowner what their
options may be and what will be the next steps a homeowner will need
to address or act on. While this financial assessment process may be
grueling to the homeowner, a realistic assessment of the situation may
enable the homeowner to find a solution he or she might not have
believed was previously available.

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