A hardship letter is a one-page document provided to a lender to explain delinquency and request a modification to your loan to bring you current. The most common form of loan modification is mortgage loan modification. A hardship letter with the right information can make the difference between keeping your home or losing it to foreclosure.
Provide the Loan Information
The first items contained in a hardship letter should be the loan number, name or names of the people securing the loan, the address of the property and a way in which you can be contacted. Do not force the loan workout specialist to look up your information, or your letter may find itself at the bottom of the stack. It is also wise to include both a phone number and email address in contact information because many loan workout specialists are often handling a large case load. Make communication as easy as possible.
Explain Why You're Requesting a Modification
Provide a detailed but succinct explanation of what has changed in your financial situation that is causing you to fall behind on your payments. Reasons for late payments may include items such as job loss or reduction in hours or pay, death of a spouse, serious illness, relocation, military duty or divorce. Give the exact date of when the change occurred so that the specialist can verify that you were current on your mortgage prior to the change.
Suggest a Modification
Suggesting an equitable modification may save an enormous amount of time in calls and emails between you and the specialist. In order to suggest a modification, you need the knowledge to calculate the effect of loan modifications on your payment. For example, if you want to request a reduction of your interest rate to decrease your monthly payment by $200, you should make the necessary calculations to determine what interest rate results in the $200 savings, then suggest that exact rate and explain how you arrived at that figure.
Explain Your Plan for Paying Under the Modified Terms
If you're requesting a modification, you need to make it clear to the specialist that you have the ability to pay under the modified loan terms, otherwise, you are wasting everyone's time. If you have just gained part-time employment, or started a new job or sold stock, explain that to the specialist. He will want to know how you expect to pay the modified amount next month, as well as in the future.
Tell the Lender How Important Your Home Is to You
Provide a couple of sentences that explain why your home is important. A borrower who has lived in a home paying on time for many years is likely to want to remain. A borrower raising children in the home is not likely to want to move. Explain your incentive for making sure you meet your modified loan obligation.
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