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

succeed.

Paystubs

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

levels.

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.