Hardship Letters
Effective Hardship Letter for your Lender
Your hardship letter helps the lender or servicer evaluate your situation and find the appropriate solution based on your intent, income, loan and circumstances. Your letter should:
A Hardship Letter to a bank or financial institution is a letter that you write in order to ask the bank to give you anther chance and consider negotiating a short-term loan modification of your mortgage loan(s) on your home. You provide a reason for the problem and a solution.
In the letter you must:
1. State the legitimate, special circumstances you have falling behind on your house payments.
2. Explain your current situation and what you are doing to try and get back on your feet.
3. Don’t make your situation worse, by complaining to them.
4. Be honest and represent the facts clearly.
5. Provide back up of your hardship (unemployment, bills), if possible.
6. Suggest a realistic solution.
Lenders do not modify loans because they feel sorry for you. They modify loans because you have convinced them that you will be able to make payments by modifying your loan. Present yourself as someone who has made a good-faith effort to rectify the problem but are unable to solve the problem and are asking for assistance. Lenders do not modify loans to improve monthly cash-flow so it can be "invested" in a business that doesn't seem very successful. Lenders do not modify loans to pay unsecured debt such as your credit card balances, when your home mortgage is a secured debt. Lenders do not modify loans because of the "explanation" of the delinquency. It is not the same thing as a proposal for a successful workout which is what the Lender is looking for from you.
Lenders do not modify loans because you claim that the hardship "destroyed your credit rating." The first thing a Lender is going to do is pull your credit report. If you can supply the car repair invoice and medical bills (or cancelled checks), showing that these expenses were incurred just before delinquencies began appearing on your credit report, you may indeed help the Lender see that the hardship was an unforeseen expense. I suggest writing in your own voice, about the details of your monthly budget, sticking to the relevant facts, and trying as hard as you can to stifle the impulse to blame your problems on everyone. Bottom line, you are in trouble; you need to work something out; you need to provide the Lender with a practical request.
The bottom line is, if you cannot write something like the following samples because you cannot come up with a set of numbers that work (and can be verified), you really have no business asking for a modification. If you can come up with reasonable numbers that work, it only helps your case with the Lender to come across as someone who has taken a clear view of the monthly budget and can suggest a concrete plan. Your chances for modification will stand or fall on the question of whether it is likely to keep you out of foreclosure, and that stands or falls on whether you can afford the modified payments out of your current income.
SUMMARY:
A hardship letter is essentially a letter that you send to your Lender to let them know about your problems and open up negotiations for what you can do. When writing a hardship letter, you want to keep in mind the following:
ü Communication
ü Offering to resolve the debt
ü Thanking them for their time and support
Remember that when seeking to understand how to write a hardship letter that the thing that you most need to think about is communication. You need to let the Lender know that you are suffering from some financial hardships at this time, but that you are not going to let it stop you from paying them the money that you owe them.
With that in mind, you need to offer alternatives as to how you are going to pay. This might sound a little bit complex, but the truth of the matter is a hardship letter should be very straightforward.
As a guideline or solution, you are preparing a financial worksheet or budget with all your available monthly income and your monthly expenses. This worksheet should come out about even or at zero to show that you are living within your budget or your income. Be sure to include all expenses which will show up on a credit report, your Lender has the right to pull your credit report and check it against your financial worksheet. Lenders are looking for permanent solutions, not a short fix where you will be delinquent again in a few months.
What your Lender really wants to hear about is what you are going to do to resolve the debt. Writing out your solutions makes sense and this will be the heart of your hardship letter. When you are doing this, remember that you can offer options like finding out if they can reduce your monthly payment, telling them what you can afford to pay every month, asking about hardship programs or other options available. What this will do is let your Lender know that you are ready and willing to make the payments that you need to make.
Remember that you should end the hardship letter on a friendly note. The more well-disposed they are to you, the better off you will be. Remember that they are going to be interested in helping you get the solution that you need so they can be paid off in full.
See an example of a hardship letter here.
See examples of hardships that lenders consider during a loan work out for loan modification here.
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