HOW TO WRITE A HARDSHIP LETTER (EXAMPLES)

Here's some information that may help you with your hardship letter

One of the items your lender or servicer will ask for during the loan modification process is a hardship letter. A hardship letter is a written explanation as to what “event” has caused you to fall behind on your mortgage and it vital in helping you stop foreclosure. This letter acts much like an outline or biography of your current “life” issues that are affecting your ability to meet your financial obligations. Keep it short, simple and to the point.

Please keep in mind that you are composing the hardship letter for your lender or servicer and because of the foreclosure crisis, they are extremely busy, back logged and overwhelmed with foreclosures, short sales and loan modification requests. So, with that in mind, do not write a book because most likely it will not get the attention of an over worked, $12 an hour loss mitigation employee of the bank. 

However keep in mind that this is a real human being analyzing the hardship letter within your lenders loss mitigation department who is responsible for determining the existence of a real hardship. They do not want to read a ten page letter regarding the loan officer who put them in the loan, why they bought the house, the memories they have had there and why they want to keep the home. Keep it short, simple and to the point. Usually 1 or at maximum 2 pages is more than enough to get your point across. Hand write your hardship letter. The fact is that people personally relate to handwriting more than a typewritten letter and this includes your lender’s loss mitigators.

Your mortgage company caseworkers manage many loans and they are understaffed and overworked as we speak because of the number of defaults. TIME IS OF THE ESSENCE! And you need as much time as possible in order to negotiate a compromise before the lender exercises its final option… FORECLOSURE! So do this ASAP!

Here is an example list of hardships that lenders consider during the loan workout process:

•Adjustable Rate Mortgage Reset

•Illness of the homeowner

•Illness of a homeowners Family Member

•Loss of Job

•Curtailment of Income

•Reduced Income

•Failed Business

•Job Relocation

•Death of Spouse or C0-Borrower

•Death of the Homeowner

•Death In the Family

•Incarceration

•Divorce

•Marital Separation

•Military Duty

•Medical Bills

•Damage to Property (natural disaster or unnatural)

•Upside Down Property Values

•Abandonment of Property

•Property Problem

•Inability to Sell Property

•Inability to Rent Property

•Mortgage Servicing Problems

Notice that “My Realtor lied to me” and “My loan officer/broker lied to me” is not on this list. Keep this in mind when writing your hardship letter. Documenting the hardship is very important to your lenders loss mitigation department and will be verified during the approval process. Without proper documentation, your file may be flagged as fraudulent. You do not want this to happen for obvious reasons as it will slow down or may even terminate the process completely.

There are two important things to remember about Loan Modifications:

1.A Loan Modification should be requested if no other reasonable options are available and/or the homeowner is experiencing a hardship.

2. Loan Modifications are designed for homeowners who can afford their homes but not their loans.

Now that you understand a little more of what your lender or servicer is looking for, it’s time to sit down and write a hardship letter. We made it easy for you by giving you a couple templates below that you can use as a boiler plate for your own letter. Make sure you make it unique to your situation. 

Remember Your Hardship Letter must be hand written by you.

•Reasons for distress – Illness, death in the family, job loss, divorce, etc…

•Include dates of employment and non-employment

•Also be sure to explain how and that it has or is going to be resolved 

EXPLAIN WHAT FINANCIAL SACRIFICES/CUTBACKS YOU’VE MADE

•Cut back on spending

•Cancelled cable/cell phone 

•Eliminated costly activities

•Met with credit counselors to arrange payment plans

•Repair situation – Any major repair issues should definitely be noted, along with a statement that you do not have the money to make these repairs. Think about minor repairs, too. It is very unlikely that your house doesn’t need some kind of repairs or upgrades in order to be at its best market value. At a minimum every house needs a fresh coat of paint and the place needs to be cleaned from top to bottom including steam cleaning any carpets and there’s usually some landscaping to be done. So included these maintenance issues as well especially if you cannot afford them. If your appliances, kitchens, or bathrooms are out dated compared to most of the other houses in your neighborhood then state this too. The idea here is to convey to the Lender the expense they will have to bear because the above things may need to be done in order to make the house saleable if they take it back in a foreclosure action. 

•Bankruptcy situation – If you’ve thought about filing for bankruptcy, say something like “My attorney has advised me to consider filing for bankruptcy but I am trying to avoid this if all possible.”

​SAMPLE HARDSHIP LETTER

(Note: You must hand write your hardship letter -- do not type it. Also, even if your situation is similar to this example, use your own words – DO NOT COPY THIS LETTER!)

Name: (Your Name)

Address: (Your Address)

Lender Name: (Your Lender)

Loan #: (your Loan #)

To Whom It May Concern, 

(1.Explanation of the events that caused you to get behind on your mortgage payments.)

The following events have caused me to get behind on my mortgage obligations:

I was terminated from my employment at ABC Company on March 2007. I had no prior notice or warning that this would happen. Before I lost my job, my house needed major repair work on the roof. I exhausted all of my savings to have the work done so it wouldn’t cause any other damage to my home. As the receipts enclosed show, the total cost for the roof was over $2,600.00.

(2. Explanation of what you have done to try to solve your situation.)

Before I was able to locate another job, I tried to borrow the money from friends and family, but had no success. I also asked my church for assistance and was told the church would try to assist me if possible. Unfortunately, however, the church was unable to give me much assistance.

After my termination at ABC Company in March 2007, I was hired at XYZ Company on May 2, 2007. My annual salary is now $40,000.00 per year, which equates to about a 15% increase in my pay. I have also been able to obtain a part-time job working about 20 hours a week, paying me $8.00 per hour. (Please see the enclosed letters from both my full-time and part-time employers, indicating the dates I started working at each place, the hours I am expected to work per week, and my hourly wages for each new job.) 

It was suggested I contact a non-profit association to help me reduce my monthly obligations on my unsecured debt, which I have done. (I have enclosed verification of my new payments through XYZ Credit Management Company.) By taking this action, I’ll save about $180.00 per month on my credit card obligations, which will give me more money at the end of each month to put toward my mortgage.

If given the chance, I feel confident that I can maintain my mortgage payments and stay current. Again, I just want to advise you that my financial position has changed for the better. I have a new full-time job making more money; I have obtained a part-time job; and I have joined a non-profit group that has helped me with my unsecured debt. I have eliminated unnecessary expenses; cut back on most of my other expenses; and established a budget by which I will live. Due to these actions, I can certainly maintain my mortgage obligation along with all my other monthly bills. My home is very important to my family and me; and I will do whatever my mortgage company suggests, within my financial means, to help me keep my home.

I thank you for your time and consideration,

  Sincerely and Respectfully,

Borrower’s Signature

Date

Co-Borrower’s Signature

Date

Remember, the main purpose of a loan modification hardship letter is to convince your lender that you will be able to pay your monthly mortgage payment on time in the future if they modify your loan. The first paragraph should focus on the positive; convincing the lender that you can make the modified monthly payment.

Basically, your lender has to make a calculated decision based on your current financial and employment status to determine if you will be a good candidate for a loan modification.

While the “Hardships” that may have contributed to your unique scenario are important to include in this letter, all you're doing is briefly explaining the financial documents provided anyway. You're humanizing the mortgage. You're forcing the underwriter to identify with your plight. But ultimately, the underwriter/reader is concerned with converting your non-performing, imminent default to a performing asset. 

We have seen many suggested hardship letter templates listed on the web. We believe that no template is a "one size fits all" solution. What happens when your underwriter reads the same letter twice (and yours is the second one)? We believe that personalizing the hardship is much more efficient and beneficial to your application. 

You can learn the basics of a successful mortgage loan modification in a couple of hours so you can greatly increase your chance of getting the help you need. The final decision is up to the lender, but taking the time to do your mortgage loan modification right greatly increases your chances of being accepted.