[vc_row][vc_column][vc_column_text]If you are a homeowner struggling to make payments on your mortgage, you may be considering applying for assistance from your bank to resolve the issue and avoid foreclosure.
Regardless of whether you want to keep your home or to get out of your home (either as an equity sale or a short sale), your lender will ask you to send in a hardship letter as part of the required document package.
Here is a video on how to write a hardship letter that I made:
They will also ask you to check a box on your application for assistance indicating what your “hardship reason” was for defaulting on your mortgage.
It may seem like writing your hardship letter and picking a hardship reason isn’t a big deal. But, the lender actually uses the hardship to qualify you for their assistance programs (like loan modifications, repayment plans, short sales and other loss mitigation agreements).
What’s hard is – your lender won’t tell you what they’re looking for within the hardship letter to make you eligible for assistance.
If you don’t know what they’re looking for, you could make a mistake with your letter and unintentionally cause yourself to get denied.
To stand the best shot at getting approved for an assistance option, you need to know what the lender is hoping to see when they read your hardship letter and review your application.
A home loan modification hardship letter is an important document that can help you avoid foreclosure on your home when you are unable to make your mortgage payments. This letter allows you to explain your financial situation to your lender and request an adjustment to your loan terms. With the right information and proper formatting your hardship letter can improve your chances of getting approved for a loan modification.
What to Include in a Hardship Letter for Home Loan Modification
Your hardship letter should provide details about your current financial circumstances and how they prevent you from paying your mortgage as agreed upon initially. Here are some key elements to include:
1. Introduce Yourself
- State your full name and property address.
- Provide your home loan account number so the lender can easily identify your file.
2. Explain the Hardship
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Describe the specific event or circumstance causing your hardship. Common examples include job loss, reduced income, major medical expenses, divorce or death of a spouse.
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Provide key details such as dates and amounts relating to the hardship. For example, note when you lost your job or when you began accumulating major medical bills.
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Explain how the hardship impacted your finances and ability to pay your mortgage. Help the lender understand why you could no longer afford the payments.
3. Request Loan Modification
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Specify the type of relief you need. For example, you may request a reduced interest rate, extended repayment term, delayed or reduced payments for a few months, or converting a variable rate to a fixed rate.
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If possible, indicate how much you can afford to pay each month given your current financial situation.
4. Include Financial Details
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List your current monthly household income from all sources.
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Itemize key monthly expenses like housing, debt payments, utilities, food, medical bills, etc.
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Briefly explain any other assets, debts or financial obligations that impact your situation.
5. Attach Supporting Documentation
- Include recent pay stubs, bank statements, medical bills or other documents that validate the details described in your letter.
6. Express Willingness to Repay
- Emphasize that you wish to keep your home and will resume making regular mortgage payments if the lender can modify your loan.
7. Thank the Lender
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Politely thank the lender for their time and consideration.
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Mention your desire to continue your relationship with the lender.
Formatting Tips for Hardship Letters
Follow these tips to properly format your hardship letter:
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Address the letter to a specific person or department at the lending institution if possible. Otherwise, use a generic greeting like “To Whom It May Concern.”
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Keep the letter to 1 page by being concise and only including relevant details.
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Use a standard business letter format with proper grammar, paragraphs and sections.
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Print on quality letterhead or paper and sign in blue or black ink.
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Include your contact information in the letterhead or under your signature.
Strategies to Make Your Hardship Letter Effective
To maximize your chances of getting mortgage relief, implement these strategies:
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Be honest. Don’t exaggerate your hardship or provide false information. The lender will verify details.
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Take responsibility. Avoid blaming the lender or economy. Focus on the facts impacting your personal situation.
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Use a polite, appreciative tone. Don’t make demands or sound angry. Thank the lender for their consideration.
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Highlight recoverability. Explain how your circumstances might improve to show you can repay in the future.
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Act quickly. Send the letter as soon as you realize you cannot make payments. Don’t wait until you miss multiple payments.
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Follow up. Call to confirm they received your letter. Politely follow up in 2-3 weeks if you don’t get a response.
Hardship Letter Template and Examples
Review this sample hardship letter and letter examples to help guide your own letter writing. Customize to match your specific situation.
Sample Hardship Letter Template
[Your Name]
[Street Address]
[City, State Zip]
[Date]
[Lender Name]
[Lender Address]
[City, State Zip]
Re: Hardship letter for [loan number/mortgage account number]
Dear [Lender Name],
I am writing regarding the mortgage for my home at [your address] which I purchased on [closing date]. I am currently [x months] behind on my mortgage payments due to a significant decrease in my income.
[Briefly explain hardship context in 1-2 sentences, like job loss or medical emergency.]
Due to [hardship], I am unable to afford my current monthly mortgage payment of [$x per month] on my present income of [$y per month] from [source, like unemployment benefits]. I humbly request that you reconsider the terms of my home loan and allow me to modify my payment plan.
[Explain proposed repayment terms you can manage, based on current income like lower interest rate or number of months’ reduced payment.]
Sincerely,
[Your name]
[Phone number]
[Email address]
Hardship Letter Example 1 – Job Loss
Dear ABC Loan Services,
I am writing to request a modification to the mortgage loan (#12345678) on my home at 123 Oak Street, Dover, NH 12345. I am currently 3 months delinquent on my mortgage payments due to a job loss on January 5, 2022.
After over 10 years working as a sales manager for Auto Mart, my position was eliminated due to company downsizing. I am currently receiving unemployment benefits, but it is not enough to cover my monthly mortgage payment. My current monthly income including unemployment payments totals $2,800 while my mortgage payment is $1,200 per month.
I am doing my best to secure new employment and have attached copies of my last two pay stubs, unemployment benefit approval letter, and current resume. However, I do humbly ask that you allow me to pay $700 per month for the next 6 months until I can find a new job. I wish to continue living in my home and will resume making the regular payments as soon as I start earning my prior income.
Sincerely,
John Smith
(123) 456-7890
[email protected]
Hardship Letter Example 2 – Medical Emergency
To Whom It May Concern,
I am writing to explain my situation regarding the mortgage on my home at 456 Park Street, Orlando, FL 12345. I have been a loyal customer with your bank for over 8 years, but recent medical issues have caused me to fall behind on my monthly payments.
In November 2021, I was diagnosed with a heart condition that required open heart surgery and extensive recovery time. Due to this medical emergency and time away from work, I incurred substantial medical costs and was also forced to use most of the savings I had built up.
My medical emergency caused me to miss 6 weeks of work, resulting in a 25% decrease in my household’s monthly income during that period. Unfortunately, this setback forced me to default on my last 2 mortgage payments.
I have included copies of my medical bills and leave approval from my company documenting the hardship. I am now back at work and earning my regular income. I kindly ask that you allow me to modify my mortgage by extending the repayment term to 40 years. I can afford the lower monthly payment this term extension would allow.
Please contact me at the number or email below to discuss my options. I appreciate your understanding at this difficult time. I look forward to continuing my relationship with you.
Sincerely,
Jane Doe
(321) 654-0987
[email protected]
Frequently Asked Questions
How soon should I submit a hardship letter?
Send the letter as soon as you realize you can’t make your mortgage payments. This shows good faith effort to address the situation promptly.
What if my hardship is temporary?
Explain when you expect your situation and income to recover. Offer to make larger “catch up” payments once the hardship ends.
What if I can only afford partial payments?
Propose the specific payment amount you can reliably make each month and request a temporary reduction.
Can I send a hardship letter by email?
You can email your hardship letter initially but it’s best to follow up by sending a printed copy with your signature via postal mail.
What if I’m denied a loan modification after sending a letter?
You can appeal the decision by sending another letter reinforcing your hardship and repayment commitment. Also call to politely discuss your case with a representative.
Get Help Modifying Your Home
Figure out whether you want to keep or get rid of the home and then send the right message with your hardship letter
Decide whether you want to keep your home or get rid of your home and then get clear on the message your hardship letter should convey:
If you’re trying to keep your home, you want your letter to convey this message:
I experienced a genuine (qualifying) financial hardship that caused me to default on the mortgage but the financial issues surrounding the hardship have been resolved; I am now capable of resuming regular mortgage payments.
If you’re trying to get out of the home, you want your letter to convey this message:
I have experienced and am currently experiencing a financial hardship (an ongoing circumstance) that is not resolved and will not be resolved in the near future. I am not able to resume making mortgage payments.