How to Write an Effective Mortgage Loan Hardship Letter to Prevent Foreclosure

Facing financial hardship and struggling to pay your mortgage can be an incredibly stressful situation. As a homeowner, you have legal and financial obligations under your mortgage contract. Failure to make timely payments can put you at risk of default and foreclosure.

But what if an unexpected life event or circumstance makes it genuinely difficult or impossible to make those payments? Does it mean you will inevitably lose your home? Absolutely not! You have options to avoid foreclosure, such as requesting mortgage assistance from your lender. A key part of that process is writing an effective mortgage loan hardship letter.

What is a Mortgage Hardship Letter?

A mortgage hardship letter is a written explanation to your mortgage lender or servicer describing your current financial situation and inability to make timely mortgage payments. It provides details on the nature of your hardship, when it began, how long it may continue, and the specific assistance you are requesting to avoid default and foreclosure

Hardship letters are a vital tool for homeowners facing tough times whether due to job loss medical issues, divorce, death in the family, or other unforeseen circumstances. They allow you to make your unique situation known to the mortgage company and request their help through programs like forbearance, repayment plans, loan modifications, short sales, or deed-in-lieu of foreclosure.

When Do You Need a Hardship Letter for Your Mortgage?

In most cases, you would need to submit a hardship letter when:

• You have missed or expect to miss at least 2-3 mortgage payments due to financial difficulty.

• You need long-term or permanent relief, not just 1-2 months of forbearance.

• The mortgage servicer specifically requests a hardship letter to process your assistance application.

• You want to explain the context of your situation in writing to improve chances of mortgage relief approval.

Some common situations requiring a mortgage hardship letter include:

• Job loss or reduced work hours

• Pay cuts, demotion, or loss of overtime

• Loss of income due to disability, divorce, or death of spouse

• Uninsured medical expenses

• Large out-of-pocket costs for home repairs after a disaster

• Increased living expenses from caring for children or elderly parents

• Overextended on credit card or other debt due to prior hardship

How to Write an Effective Hardship Letter

Writing a compelling hardship letter is critical to get your lender’s attention, empathy, and approval for mortgage relief. Follow these tips:

1. Include Accurate Contact Information

Provide your full name, mailing address, phone number, email, mortgage account number, and property address (if different than mailing address).

2. Explain the Hardship Situation Clearly

Briefly explain your specific situation or life event that caused financial hardship leading to mortgage payment issues. For example, job loss, disability, major illness, death in family, divorce, etc.

Focus only on details relevant to your inability to pay the mortgage currently. Avoid lengthy background stories.

3. Note When the Hardship Began

State specifically when the financial hardship started. Provide dates or timeframe as applicable.

For instance, note the job loss date, when disability/illness began, or date of a disaster affecting the property. This shows the lender when and why you began having payment problems.

4. Describe Efforts Made to Resolve It

Explain any steps you’ve taken to mitigate the situation, like cutting expenses, using savings, taking on additional jobs, applying for assistance programs, etc.

This shows the lender you’re making every effort to pay and get back on track.

5. Explain Your Current Financial Situation

Provide details to help the lender understand your overall income, expenses, and ability to pay the mortgage:

• Current household income amount and sources
• Monthly mortgage payment amount
• List of other major monthly expenses (food, utilities, medical, etc.)
• Any attempts to obtain credit or borrow money from friends/family

Back this up with supporting documentation like bank statements, bills, medical invoices, etc.

6. State the Timeframe Expected

If possible, note how long you expect the hardship to last – whether short-term (up to 6 months) or long-term/indefinite. This helps the lender offer appropriate mortgage relief programs.

7. Specify the Assistance Needed

Clearly state what you are asking the lender to do to help you through the hardship period. For instance:

• Reduce/lower mortgage payment temporarily

• Allow 3-6 months forbearance with payments added to end of loan

• Modify loan terms like interest rate or length to lower payment

• Allow short sale or deed-in-lieu of foreclosure

The more specific your request, the better.

8. Describe Your Plans for the Property Long-Term

Explain whether you want to keep the home long-term or will need to sell/transfer it. This helps the lender offer relief options aligned with your intentions.

For example, state if you plan to:

• Get back on your feet financially and resume making full payments
• Sell the home yourself in a certain timeframe
• Agree to a short sale or deed-in-lieu of foreclosure

9. Close With a Call to Action

Politely request the lender contact you to discuss mortgage assistance options, approve a specific relief program, or respond to your hardship claim within a certain timeframe (2 weeks, 30 days, etc.)

Thank them for their time and consideration.

10. Proofread Carefully Before Sending

Be sure to carefully proofread the letter and have someone else review it too. This ensures it’s free of any errors and clearly states your situation.

Correct any typos, grammar issues, inconsistent details, or repeated information before sending to the lender.

What to Include with Your Hardship Letter

Along with a well-written letter, you need to provide documents to back up and reinforce the details of your hardship claim. Commonly required documents include:

• Hardship assistance application forms from the lender
• Recent pay stubs, bank statements, tax returns
• Documentation related to the specifics of your hardship such as medical bills, job termination notice, divorce decree, etc.
• Completed IRS Form 4506-C allowing lender to access your tax returns
• Completed Dodd-Frank certification form

Work closely with the mortgage servicer to supply all documentation required for your situation timely. The more complete your application, the better your chances for approval.

How to Submit Your Hardship Letter

Once your letter is polished and documentation gathered, submit the full package to your mortgage servicer through whichever mode they specify, such as:

• Email

• Fax

• Certified mail

• Online loan portal

• In-person at local branch

Be sure to keep copies of everything for your own records. Follow up with the servicer within a week or two if you don’t receive confirmation of receipt. Don’t wait for them to contact you. Being proactive can make a difference in getting approved for mortgage relief quickly.

Getting Help from a HUD Counselor

If you need guidance with the hardship letter writing and relief application process, consider contacting a HUD-approved mortgage counselor. They can advise you on the best options for your situation, assist with completing forms accurately, and even negotiate with the lender on your behalf. Counseling help is free or low-cost and can give you greater peace of mind.

Act Fast to Avoid Foreclosure

If you’ve fallen behind on mortgage payments, time is of the essence. The sooner you can submit a compelling hardship letter and documentation to your lender, the better your chances of gaining their assistance and avoiding foreclosure altogether.

With an understanding of your personal situation and a request for their help in writing, most lenders want to work with homeowners in hardship to find solutions. Don’t delay in reaching out. Be proactive and persistent to get back on the right financial track.

The process starts with an effective mortgage hardship letter, but doesn’t end there. Follow through diligently, communicate regularly with your lender, and be cooperative to position yourself for the most positive outcome. You can make it through these challenging times!