How to Write a Hardship Letter to a Mortgage Lender

If you're trying to stave off foreclosure on your home and want your lender to consider an alternative to your current mortgage terms, one of the first things you need to do is write a letter of hardship to the lender. This document is a necessary first step in creating a loan "workout", modification, forbearance agreement or other change to your loan status. The letter should focus on a specific event that caused you to fall behind on your mortgage payments. It's a brief, to-the-point explanation, a snapshot of your current situation.

Instructions

1

Gather and review all your financial documents. Assess your true financial situation before proceeding with a loan modification. A loan workout can adversely affect your future credit rating.

2

Review the acceptable reasons for requesting a loan modification. Banks and other lenders require tangible reasons, not vague explanations, before considering your modification request. Acceptable reasons include illness and/or medical bills, loss of job, reduced income, a failed business, single-parent household after divorce (not simply a divorce or alimony/child support payments), loss of spouse or household income earner, military duty or a natural disaster such as an earthquake that devastated your home. More lenders are now also considering changes ("resets") in adjustable rate mortgages.

3

Include the date, the company name (and your representative, if you have one), company address and company phone number in the upper-left portion of the letter (the "inside address"). Skip a line and include a "regarding" line ("RE:"), which is a two- or three-word description of the subject matter, such as "RE: Loan workout request". Include your name and account number immediately below that line.

4

Compose the body of your letter. Get right to the point. Explain that your husband was injured at work, for example, and that you have yet to receive unemployment benefits. Provide dates of any incident you mention and offer a resolution for the bank to consider, such as, "We expect a full recovery for my husband but he won't be back to work for six months. At that point, we should be able to pay our bills on time. Until then, could you please consider a restructuring of our mortgage to reduce payments by $150 a month." There are scores of sample letters available online (see References).

5

Avoid using excuses such as: you maxed out your credit cards, your wife spends too much money, or your kids are now in college. These are circumstances that you are expected to manage as a homeowner and as an adult. Do not blame the bank for your misfortunes or otherwise complain about high prices or inflation. Although you should write with emotion in explaining your situation, don't belabor the issue. The bank knows you're in financial trouble.

6

Include a paragraph near the end explaining that you're enclosing documents and statements verifying your financial situation, and include copies of those documents.

7

Close by thanking the bank for their time and consideration of the matter. Include your name, any co-signer, your account number and your address and phone number. (You can also include an email address.)