What a hardship letter should include …
Whether it is a foreclosure hardship letter or short sale hardship letter, it should comprise of the following points:
Identifying information including the homeowner’s name, address and account number.
Mention what hardship you’re going through and possible reasons for it.
You should specify the exact dates of the hardship.
Give a brief overview of your income, expenses and mention if you’re expecting a change in your income. Also inform the lender about any lump sum amount you have in order to compensate for the default.
Give a brief explanation of the workout plan you wish to pursue and state the reasons as to why you think it may work for you.
Include the ways and the time you or your counselor (who’ll negotiate with the lender) can be contacted by the lender.
Apart from including the above points while writing a real estate hardship letter, you should provide attachments related to your income, expenses, financial statements to prove your assets, liabilities, tax returns for the previous years, current pay stubs etc. If however, your home is on the market, then you’ll have to provide a copy of the realtor agreement along with the hardship letter to stop foreclosure.
Types of hardship that the lender may accept…
Here’s a list of hardship for which your hardship letter may be accepted by lenders.
Loss of employment
Medical problems due to which you aren’t able to maintain your job.
Reduction in salary
You may be a single parent with not much income and no child support
You’re a victim of some disaster
Death of spouse or co-borrower
Marital separation
Types of hardship lenders may not accept…
Your hardship letter may be rejected due to the reasons given below.
You’re a student and cannot pay off the mortgage
You’re going through divorce
Your spouse have threatened to file bankruptcy

READY? Get out the paper (or computer), write an outline of the letter (include topics you’re going to expand on), then get specific about your hardship and how a loan modification will correct the problem and keep it from happening again. If the bank doesn’t see an end to the problems you’re having, they’ll be less likely to give you the attention you’re requesting. Ideal length for your letter is between 1 full page up to about 1 1/2 pages… you definitely shouldn’t go over the 2 pages in length.

ONE LAST ITEM: Don’t ask for a loan modification if you obtained your loan by embellishing the facts on your application. Your actions may implicate you in having committed loan fraud.

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A loan modification is a good solution for those who cannot refinance, are behind on payments or struggling to make the payments, have experienced a genuine hardship, and want to stay in the home. A loan modification is a permanent solution and is not meant to be used as a temporary stop to the foreclosure process.

A loan modification agreement is made between a lender and borrower to reduce the payment burden of the borrower by reducing the interest rate on the loan, extending the length of the repayment of the existing loan, or providing the borrower with a different type of loan.

The modification changes the contract agreement which is designed to help homeowners who cannot make current monthly payments or whose payments are subject to go up due to impending adjustable rate increases.

The final decision on whether or not to accept the loan modification plan may not rest with the mortgage company. In most cases, the decision is made by the servicing firm which is under contract to the lender. Many lending institutions are agreeing to modification plans in order to ward off the defaults and foreclosure actions that are likely to come if something isn’t done to put a stop them.

loan modification letter
One of the items your lender or servicer will ask for during the loan workout or 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.

Please keep in mind that your are composing the hardship letter for your lender or servicer and because of the foreclosure crisis, they are extremely busy and back logged. 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. Keep it short and to the point. Usually 1 or at maximum 2 pages is more than enough to get your point across.

Here is an example list of hardships that lenders consider during the loan workout process:
Adjustable Rate Mortgage Reset- Payment S**** (uncommon, but we will see more lenders accept this in the future)
Illness
Loss of Job
Reduced Income
Failed Business
Job Relocation
Death of Spouse or C0-Borrower
Death
Incarceration
Divorce
Marital Separation
Military Duty
Reduced Income
Medical Bills
Damage to Property (natural disaster or unnatural)
Other (Please Specify)
Now that you understand what your lender or servicer is looking for, it’s time to sit down and write a hardship letter. I 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 that your hardship letter is only one piece of the loan workout process, but key in helping you avoid foreclosure. You will still need to jump a few hurdles with your lender before they will approve you any kind of work out plan.

Example Harship Letter:

Name: (Your Name)
Address: (Your Address)
Lender Name: (Your Lender)
Loan #: (your Loan #)

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.

The main reason that caused us to be late is (insert reason here and don’t be too lengthy and long winded) Soon after being late and our income not being nearly enough, we had fallen further and further behind. Now, it’s to the point where we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time we have exhausted all of our income and resources so we are turning to you for help.

(The approximate date of hardship and we believe that our situation is Temporary or will be Permanent.)

Our situation has got better because (reason here) and we feel that a loan modification would benefit us both. We would appreciate if you can work with us to lower or delinquent amount owed and or payment so we can keep our home and also afford to make amends with your firm.

We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully,

Borrower’s Signature
Date
Co-Borrower’s Signature
Date

Hardship Letter Contributed by LoanSafe.org Forum Member September 7, 2007 To: Countrywide Mortgage account # 058989482
Re: Mortgage modification program

Due to the recent adjustment to the mortgage I currently have with your company, I am finding it very difficult to afford the new payment. I have a 3 year fixed rate which is now adjustable and is schedule to adjust again in Feb. 2008.

Considering my current income, there will be no way I can afford the increased payments come February. Hopefully there is way to renegotiate the terms of my current mortgage to avoid default and help stop foreclosure on my home.

Is it possible to have my current adjustable rate mortgage converted to a fixed rate? If this is not possible can the next rate change be postponed to a future date to allow me to hopefully refinance. Any other solutions you could provide would be greatly appreciated.

I have had no problem making my payments for over three years now and do not want that to change. My mortgage was originally written by another company and bought by Countrywide. The original mortgage terms are terrible but it was the only loan I was qualified for at the time. I was assured that refinancing would be no problem but that turned out not to be true due to the downturn of the housing industry.

The main problem is that my property is now worth about 5-10% less than what I paid for it which is preventing me from being able to refinance. I was researching on the internet and came across the Fannie Mae Announcement #06-18 (Oct. 4th 2006) regarding the servicing of Conventional Mortgage Modifications.

I believe this addresses the situation I currently find myself in along with many other homeowners. Attached are recent pay stubs showing my current income.

Thanks you for your time and consideration.

FDIC Loan Modification Program Guide – “Mod in a Box”

This guide provides an overview of the FDIC’s program to assist bankers, servicers, and investors in this process. It outlines FDIC program terms at IndyMac Federal Bank, offers insight into the specific portfolio characteristics that drive modification modeling at that bank, and provides a framework for developing and implementing a similar program at your institution.

http://www.fdic.gov/consumers/loans/loanmod/loanmodguide.html

home loan modification

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