What Is Home Preservation Assistance?

Home preservation assistance refers to measures designed to help homeowners facing financial difficulties avoid foreclosure and remain in their homes. Unexpected financial challenges can make it difficult to meet mortgage obligations, putting homeownership at risk. These initiatives aim to provide solutions for individuals experiencing legitimate hardships that impact their ability to make timely mortgage payments.

Defining Home Preservation Assistance

Home preservation assistance addresses situations where homeowners encounter significant financial setbacks that threaten their ability to keep up with mortgage payments. Common circumstances leading to such a need include job loss or a substantial reduction in income. Medical emergencies, which can lead to considerable expenses or an inability to work, also frequently contribute to financial distress. Other life events, such as divorce or the death of a household member, can similarly disrupt a family’s financial equilibrium.

These programs are specifically crafted to assist homeowners experiencing these types of legitimate financial hardships. The assistance typically involves working directly with mortgage servicers or other entities to explore options that can make mortgage payments more manageable. The goal is to prevent foreclosure by offering tailored solutions that address the root causes of the payment difficulty.

Overview of Available Options

Homeowners facing payment difficulties have several common options to explore, each designed to provide relief.

Loan Modification

A loan modification involves a permanent change to the original terms of the mortgage loan. This can include reducing the interest rate, extending the loan term, or in some cases, deferring a portion of the principal balance to the end of the loan. The aim is to lower the monthly payment, for instance, by extending a loan term up to 40 years.

Forbearance

Forbearance offers a temporary suspension or reduction of mortgage payments. This period typically ranges from three to twelve months, providing a short-term reprieve for homeowners to address their financial hardship. After the forbearance period concludes, missed payments must be repaid through a lump sum, a repayment plan, or by deferring the amounts to the end of the loan term.

Repayment Plan

A repayment plan is an agreement where past-due amounts are spread out and added to regular monthly payments over a set period. This arrangement typically lasts for a shorter duration, often between three to six months, allowing the homeowner to catch up on missed payments gradually. This option is generally suitable for those experiencing a temporary financial setback who can afford slightly higher payments for a limited time.

For situations where retaining the home is not feasible, other alternatives exist.

Deed-in-Lieu of Foreclosure

A deed-in-lieu of foreclosure is a voluntary arrangement where the homeowner transfers ownership of the property directly to the lender to avoid the formal foreclosure process. This can help homeowners avoid the credit impact of a foreclosure and may include a waiver of any remaining deficiency balance on the mortgage.

Short Sale

A short sale involves selling the home for less than the outstanding mortgage balance with the lender’s approval. The lender typically agrees to this when the home’s value is less than the amount owed, and the homeowner can demonstrate financial hardship. While a short sale can still negatively affect credit, its impact is often less severe than a full foreclosure.

Gathering Necessary Information and Documentation

Before applying for home preservation assistance, homeowners must meticulously gather a range of personal and financial documents. This preparation ensures a smoother application process and provides the mortgage servicer with a complete picture of the financial situation.

Key documents typically required include:
Photo ID
Recent pay stubs (past two months)
Tax returns (last two years)
Profit and loss statements or 1099 forms (for self-employed individuals)
Recent bank statements (last two months)
Recent mortgage statements and loan number
Hardship letter explaining the financial difficulty, its impact, and steps taken to resolve it. This letter should also state the specific relief requested.
Proof of unemployment benefits, Social Security income, or statements for other significant debts.

Mortgage servicers typically provide guidance on how to access their specific application forms. Accurately completing all informational fields on these forms using the gathered documents is a foundational step.

Submitting Your Application

Once all necessary information and documentation have been meticulously gathered and prepared, the next step involves submitting the complete application package. Mortgage servicers typically offer several methods for submission, including secure online portals, mail, or fax. If using an online portal, the process usually involves uploading scanned documents and completing any remaining digital forms before a final review and submission.

For submissions via mail, it is advisable to use certified mail with a return receipt requested, providing proof of delivery and a tracking record. Regardless of the method, it is crucial to include the loan number on every page submitted to ensure proper association with the account. Upon receipt of the application, servicers are generally required to acknowledge it within five business days.

Following submission, homeowners should anticipate a review period, which can vary but often takes between 30 to 90 days for a decision. During this time, the servicer may contact the applicant for additional information or clarification, making prompt responses essential to avoid delays. Maintaining copies of all submitted documents and keeping a detailed log of all communications, including dates, times, and names of representatives, is a recommended practice for tracking the application’s progress.