While we always want to make our monthly mortgage payments, sometimes life can get in the way. If youâre in need of mortgage assistance, there are options available. One of those options involves writing a financial hardship letter. A financial hardship letter is a written document for your lender explaining why youâre unable to meet your financial obligations. Letâs learn more about how these letters work, when to use them and how to write an effective letter.
Falling behind on your mortgage payments can be stressful and scary. If you are struggling financially writing a hardship letter requesting mortgage loan modification from your lender is an important step. A well-written hardship letter explains your situation and demonstrates why you require modified loan terms to avoid default or foreclosure.
In this comprehensive guide we will provide tips on how to write an effective sample hardship letter to request mortgage loan modification.
What is Mortgage Loan Modification?
Mortgage loan modification is when your lender changes the original terms of your home loan to make it more affordable for you. Reasons for seeking mortgage modification include:
- Job loss
- Reduction in income
- Divorce or medical expenses
- Adjustable-rate mortgage payment spike
Some common types of mortgage modifications include:
- Lowering the interest rate
- Extending the repayment period
- Adding missed payments to the loan balance
- Reducing principal balance
Loan modification provides an alternative to foreclosure if you’re facing financial hardship but want to keep your home.
When Do You Need a Hardship Letter?
A hardship letter is a request to your mortgage lender for temporary relief or permanent loan modification. You need to write and submit a hardship letter when:
- You have missed or will soon miss mortgage payments
- Your mortgage is in default
- You do not qualify for refinancing options
- You want to request a specific loan modification plan
Your lender will require a hardship letter to evaluate your circumstances and decide if mortgage modification is appropriate.
Hardship Letter Format
A hardship letter has a standard business letter format. Be sure to include:
- Your name and property address
- Lender’s name and address
- A clear subject line, like “Request for Mortgage Loan Modification”
- Well-organized, concise paragraphs
- Polite, formal language
- Your signature and contact information
Keep the letter to one page if possible. Submit along with documentation of your hardship.
Tips for Writing Your Hardship Letter
Follow these tips when drafting your mortgage hardship letter:
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Explain your hardship: Clearly describe the events that caused you to fall behind on payments. Provide specific dates and details. Common hardships include job loss, medical bills, divorce, or death of a family member.
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Take responsibility: Admit fault for missing payments rather than blaming the lender. Show you acted in good faith.
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Ask for a specific outcome: Propose a modification plan such as reduced interest rate, lower monthly payment, or loan term extension. Don’t just ask for “help” generically.
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Describe your ability to repay: Explain how your situation has changed to allow you to make affordable monthly payments if the loan is modified.
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Add supporting documentation: Include evidence like pay stubs, medical bills, divorce documents.
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Be positive: Politely request assistance and express willingness to work with lender. Thank them for their consideration.
Sample Hardship Letter
Use this sample hardship letter as a template when drafting your own:
<begin letter>
Your Name
Your Address
City, State Zip
Date
Lender Name
Lender Address
City, State Zip
Re: Request for Mortgage Loan Modification
Account Number: _________
Dear [Lender Representative],
I am writing this hardship letter to explain my current financial situation and request mortgage loan modification on my home at [your address].
Due to [job loss, medical expenses, divorce, etc], I am no longer able to make the monthly mortgage payments on my home under the existing loan terms. [Explain details of hardship here – dates, amounts, circumstances]. This has prevented me from making full mortgage payments for the past [x months]. I currently owe $xx,xxx and am [x months] behind on payments.
[If applicable: My financial situation has improved, and I am now able to make regular monthly payments, but cannot bring the past due amount current without modification. Explain improved situation here].
I am proposing the following loan modification terms:
- Reduced interest rate from [current rate] to [proposed lower rate]
- Extended repayment term from [current term] to [proposed longer term]
This will allow me to make affordable payments of $xxx per month. I have attached documentation supporting my financial status.
Sincerely,
[Your name]
[Your contact information]
<end letter>
Make sure to customize your hardship letter with your personal details. Provide as much documentation as possible to boost your chances of approval.
What to Include with Your Hardship Letter
It’s important to submit evidence to back up the claims in your hardship letter. Examples of documentation to provide:
- Pay stubs showing reduced income
- Bank statements showing financial distress
- Medical bills or expenses
- Letter documenting unemployment
- Credit card statements and other debt
- Tax returns from previous years
- Bills showing overall expenses
Providing documentation lends credibility to your hardship claim and shows the lender you are acting in good faith.
Hardship Letter Sample for Different Situations
While the general format stays the same, the details in your hardship letter will vary depending on your specific situation.
Job Loss Hardship Letter
If you lost your job, explain how this loss impacted your financial stability, how long you were unemployed, and your current income status. Provide documentation like unemployment paperwork, job termination letter, pay stubs if you’ve found a new job, and severance package details.
Medical Hardship Letter
For medical hardships, detail your condition, dates of treatment, and total medical expenses. Include copies of medical bills and doctor’s notes. Explain how treatment and expenses prevent you from making full mortgage payments.
Divorce Hardship Letter
If you are going through a divorce, describe how the legal fees, change in household income, and other factors make it difficult to pay your mortgage. Submit divorce paperwork, attorneys fees, letter from your lawyer, and any court documents.
Death Hardship Letter
If the primary breadwinner in your household has passed away, note their previous income supporting the mortgage payments. Provide a copy of the death certificate and paper trail of your current income and assets.
The more details you can provide for your specific situation, the better.
Submitting Your Hardship Letter
Be sure to send your letter and documentation by certified mail with return receipt requested. This will provide proof the lender received your request. Make photocopies before sending to have for your records as well.
You can expect an acknowledgment from the lender within 5 business days and a decision within 30 days. If you do not hear back, follow up with the lender. Be persistent and professional to increase chances of loan modification approval.
Hardship Letter Alternatives
If mortgage loan modification is denied, consider alternatives like:
- Special forbearance – Temporarily reduced or suspended payments
- Repayment plan – Repay back payments over time
- Loan refinancing
- Selling your home or deed in lieu of foreclosure
- Bankruptcy
Be proactive and keep communicating with your lender to avoid foreclosure.
Frequently Asked Questions
What if my hardship is temporary?
Explain when you expect your financial situation to improve and why temporary modification would help you get through this period.
Will loan modification affect my credit score?
Late mortgage payments typically damage your credit, but getting approved for modification may actually help improve your credit over the long-term.
How often can I request mortgage modification?
You can request additional modifications if you successfully complete the initial modified loan trial period. But multiple modifications are not guaranteed.
What if I’m denied for mortgage modification?
Ask the lender why you were denied and discuss alternatives like repayment plans, forbearance, or other workout options to avoid foreclosure.
Conclusion
Writing a compelling hardship letter is crucial when requesting mortgage loan modification from your lender. Clearly explain your financial hardship and provide documentation to improve your chances of approval. Use this guide and sample letter to draft your own mortgage modification hardship letter quickly. Act fast when facing financial distress to save your home.
Frequency of Entities:
mortgage loan modification: 13
hardship letter: 12
loan: 8
lender: 7
mortgage: 7
payment: 5
financial: 4
foreclosure: 3
loan modification: 3
sample hardship letter: 3
monthly payment: 2
interest rate: 2
repayment term: 2
Do You Always Need To Write A Hardship Letter?
There are times when you may not need to write a hardship letter to receive financial assistance. Reach out to your service provider to see if a hardship letter is necessary.
Even if your service provider doesnât require a letter of hardship, theyâll still likely want to see a list of monthly expenses to determine whether to assist you. Below are examples of expenses you should detail to your provider.
- Medical assistance
- Transportation
- Housing utilities
- Student loans
- Pets
- Food
- Transportation
- Insurance
Remember to be as accurate as possible. For example, if you have monthly medical expenses, you should present documentation like medical bills to support them.
Include An Action Plan
You need to focus on your objectives and make it clear to your creditor that you have a plan they can help you with. Tell the creditor what you need help with and how to facilitate a solution to your financial issues. Keep in mind the options available to you will depend on what you are approved for and what your lender thinks you can do.
For mortgage relief, you may receive mortgage forbearance and deferment plans. Forbearance will allow you to temporarily pause your mortgage payments to give you time to catch up on finances. A deferment may be offered as well, which will push the payments you missed during the forbearance period to be due at the end of your loan term.
Speak with your servicer first to see what options they have available for you, such as: Below are some common options but they arenât always guaranteed:
- Increasing interest rates, but extending the loan term
- Reducing payments
- Lowering the interest rate
- Forgiving late fees
For example, you could ask for your monthly payments to be put on hold for three months or request to speak to them to discuss your options.