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.
Getting approved for a loan modification can be difficult, but a well-written hardship letter can significantly improve your chances. A hardship letter explains your current financial situation and why you require modified loan terms to avoid defaulting on your mortgage.
Lenders want to work with borrowers to find solutions, so take the time to craft an honest, detailed letter that makes your unique case. Follow these tips to learn how to write an effective hardship letter for loan modification.
Your hardship letter needs to demonstrate that you made a good faith effort to pay your mortgage and that your hardship was out of your control Here are key elements to include
Briefly explain the event that caused your financial hardship. Common hardships include job loss, reduced income, divorce, unexpected medical expenses, disability, death in the family, etc. Provide relevant dates and details.
Explain how the hardship impacted your finances and ability to pay your mortgage. Provide details about loss/reduction of income, depleted savings, maxed out credit cards, other debts, etc.
Clearly state the relief you’re requesting, like reduced interest rate, extended term, forgiving late fees, etc. Asking for a specific solution shows the lender you’ve thought critically about a workable remedy.
Lenders want to see you can resume making (modified) payments. Explain how your situation and income will improve moving forward. Provide a realistic, proposed payment plan based on your current and expected financial situation.
Include documents like bank statements, pay stubs, medical bills, divorce decree, death certificate, etc. to prove and add credibility to your claims.
Tell the lender you wish to keep your home if possible. Explain the importance of your home to you and your dependents. Lenders want to avoid foreclosure too.
Follow these formatting tips to further improve your chances:
Use this sample letter as a guide when drafting your own:
ABC Mortgage Company
123 Main St.
Anytown, CA 12345
RE: Request for mortgage loan modification
Dear ABC Mortgage Company:
I am writing regarding the mortgage for my home at 123 Oak Rd., Anytown, CA 12345. I am requesting mortgage relief assistance due to financial hardship caused by unexpected medical bills and loss of income.
Six months ago, I suffered a back injury that prevented me from working and required surgery and physical therapy. The medical expenses have exhausted my savings and maxed out my credit cards. Additionally, being out of work for 4 months severely reduced my income as a construction foreman.
I am still unable to resume full duties at my previous physical capacity, resulting in reduced income. I have attached medical documentation and recent pay stubs evidencing my situation.
I am requesting that my mortgage loan be modified to allow me to resume affordable payments. Specifically, I would like the interest rate reduced from 5% to 3% and the term extended from 30 years remaining to 40 years. Based on my current income, I can afford monthly payments of $950 (reduced from $1,500).
Having lived in my home for 10 years, it very important to me and my family. I have worked diligently to make all mortgage payments on time until this unexpected hardship arose. I am optimistic my health and income will improve in the coming months as I transition to light duty work. I wish to continue working with ABC Mortgage and repaying my loan obligation.
Here are additional tips tailored to some common hardship situations:
If your lender denies loan modification, here are some alternatives to avoid foreclosure:
Don’t wait to ask for help. Mortgage default can happen quicker than you expect. Take control early by communicating openly with your lender. A thoughtful hardship letter demonstrates your commitment and can lead to a successful loan modification plan.
Itâs crucial to make sure the contact information you include in your letter is accurate. This better ensures your server will be able to contact you. We recommend doing a read-through of your letter for any errors before sending it to your server.
Itâs best to be semi-formal in tone and specific in facts when writing this letter. While you may be feeling some very real emotional distress at the prospect of losing your home, the key here is to prove you qualify for a financial hardship exemption.
Remember to be original with your letter. You can use templates and examples â like the one we included above â for guidance, but your letter should be genuine and unique to your circumstances.
How to write a hardship letter for loan modification?
When you’re writing a hardship letter for loan modification, it is important for you to keep in mind that lenders know the reason you’ve fallen behind with your mortgage payments. Therefore, when writing a financial hardship letter, you should be honest and provide the right amount of detail.
What is a financial hardship letter?
A commonly used hardship letter, a financial hardship letter informs the lender why you’re in financial distress and your ability to sort it out. People use hardship letters for many different reasons but the most common reasons to use this type of hardship letter is requesting a short sale or loan modification to avoid foreclosure.
Why do you need a hardship letter?
People use hardship letters for many different reasons but the most common reasons to use this type of hardship letter is requesting a short sale or loan modification to avoid foreclosure. In fact, even if a foreclosure attorney is representing you, you (the homeowner) are required to present a hardship letter in the loan modification process.
How do I send a financial hardship letter?
The letter may be mailed to your lender’s office or sent electronically via email. We recommend you check if your servicer requires a letter of hardship before submitting one. If they do require one, use the financial hardship letter example below as a guide or template for your letter.