§ 31.205. Financial hardship due to circumstances beyond the homeowner’s control.
(a) General. The Agency will consider all relevant factors when evaluating whether the homeowner is suffering financial hardship and whether the financial hardship is due to circumstances beyond the homeowner’s control, including the following:
(1) The homeowner’s past and present household income and reasons for reductions in household income.
(2) Assets which were or are available and could have been or can be liquidated to correct the mortgage delinquency. The Agency will not consider assets in a pension, profitsharing, annuity or similar retirement plan or contract as available for liquidation to the extent that these funds are reasonably necessary for the support of the homeowner, or dependents or the surviving spouse of the homeowner.
(3) The homeowner’s credit history.
(4) The homeowner’s employment history—including unemployment, underemployment and the reasons therefore—and eligibility for other types of financial assistance.
(b) Examples. Examples of circumstances beyond the mortgagor’s control which result in financial hardship to the mortgagor include the following:
(1) Unemployment or underemployment, through no fault of the homeowner.
(2) Loss, reduction or delay in receipt of Federal, State or other Government benefits (for example, Social Security, Supplemental Security Income, Public Assistance, Government Pensions), or of private benefit payments—for example, pensions, annuities, retirement plans.
(3) Loss, reduction or delay in receipt of income because of the death or disability of a person who contributed to the household income.
(4) Unanticipated increases in payments to a mortgage escrow account to compensate for past underestimates of escrow requirements by the mortgagee.
(5) Expenses actually incurred related to uninsured damage or costly repairs to the mortgaged premises affecting its habitability.
(6) Expenses related to death or illness in the homeowner’s household or of family members living outside the household which reduce the amount of household income.
(7) Loss of income or substantial increase in total housing expenses because of a divorce, abandonment, separation from a spouse or failure to support.
(8) Participation by the homeowner in a recognized labor action, such as a strike.
(c) Disallowance. The following circumstances will not be considered by the Agency to be beyond the mortgagor’s control:
(1) The mortgage of the property for commercial or business purposes.
(2) Termination of employment by the homeowner without a necessitous cause or termination of the homeowner’s employment by an employer for willful misconduct.
(3) When the homeowner had sufficient income to pay his mortgage, but failed to do so. In this regard, if the homeowner’s total housing expense is less than or equal to 40% of net effective income, and no reasonable cause for financial hardship is demonstrated by the homeowner, nonpayment of the mortgage debt will not be considered to be a circumstance beyond the homeowner’s control.
(4) When the homeowner’s financial hardship was a result of money mismanagement or an over-extension of credit to the homeowner. In this regard, the Agency will consider the following in determining whether the homeowner used prudent financial management:
(i) The homeowner’s continued payment of normal and necessary living expenses after the financial hardship occurred will not be considered evidence of poor financial management. The homeowner’s continuing to make reasonable payments on debts reasonably incurred prior to the financial hardship also will not be considered evidence of poor financial management.
(ii) Debts incurred, expenditures made by the homeowner for non-necessities or failure to evidence reasonable efforts to modify or reduce unnecessary expenses, during the financial hardship, which exceeded the homeowner’s ability to pay, will be considered evidence of poor financial management.
(5) When the homeowner has had an unfavorable mortgage credit history prior to the present delinquency. The Agency will determine that a homeowner has had an unfavorable residential mortgage credit history if, prior to the present mortgage delinquency, the homeowner was in arrears on a residential mortgage for more than 3 consecutive months within the previous 5 years, except for delinquencies which were the result of financial hardship due to circumstances beyond the homeowner’s control.
(d) Eligibility. The fact that a circumstance which was beyond the homeowner’s control occurred before the homeowner actually ceased making mortgage payments does not preclude eligibility. A homeowner may, for example, suffer a loss in income but continue to pay the mortgage from savings, inheritance or borrowing and then later fall behind when the savings or other sources of funds run out.
(e) Cause of financial hardship. In determining the cause of the financial hardship, the Agency will determine whether the cause is one event—such as the loss of a job, separation or divorce, sickness or injury—or whether a series of factors beyond the homeowner’s control, in combination, caused the financial hardship.
(f) Information required. The homeowner shall provide sufficient information, including tax returns, Internal Revenue Service Form W-2, tax transcripts and other documentation deemed acceptable by the Agency to allow the Agency to assess household income and the reasons for the mortgage delinquency. The Agency will base its decision on the information received from the homeowner or other sources. The lack of sufficient information from the homeowner which is reasonably available to the homeowner, or the receipt of knowingly false or misleading information from the homeowner may result in a denial of the application on the merits.
Source The provisions of this § 31.205 amended July 1, 1994, effective July 2, 1994, 24 Pa.B. 3224; amended June 4, 1999, effective July 1, 1999, 29 Pa.B. 2859; amended April 29, 2016, effective April 30, 2016, 46 Pa.B. 2171. Immediately preceding text appears at serial pages (336311) to (336313).
Cross References This section cited in 12 Pa. Code § 31.202 (relating to eligibility for mortgage loan assistance); and 25 Pa. Code § 31.210 (relating to periods of high unemployment).
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