If you find yourself in a financial bind, a well written hardship letter directed to the bank or mortgage company is essential. Although the hardship letter is most often associated with borrowers facing foreclosure, it can be used and is beneficial in other borrower-lender situations. If you are unable to make payments on credit cards, car loans or other major loans, the hardship letter is vital. This letter is the first proactive step a borrower must take in the quest for cooperation and assistance from the lender. In the current economy, the most common situation is the borrower attempting to avoid foreclosure. Most of these borrowers are seeking a loan modification or a “short sale”. Most lenders require a hardship letter from the borrower.
In a nutshell, the hardship letter explains why you are unable to make payments and offers a solution. The explanation should include exactly what happened to create the situation. Lenders will view some situations more favorable and worthy of assistance. For example, worthwhile situations include a job loss, major decrease in salary, serious medical condition that prevents employment, or a single parent struggling without child support. Lenders may frown on reasons that include: divorce, legal issues, you are overextended, you are now a student, or you are threatening to file bankruptcy. If the financial problems are simply the result of mismanagement and/or poor decisions, the lender may not view your request in a favorable light. As you compose the letter, remember that you are not in the driver’s seat, and the lender is not obligated to assist you.
The importance of a well written hardship letter cannot be over-emphasized. Although it may seem basic, be sure to include your full name, address, lender’s name and your loan number. The letter should be concise. Your letter is not a top priority on the busy lender’s agenda. Be sure you provide a specific explanation for the arrearage, but do not whine and complain. As you describe the circumstances of your hardship, be sure to include the date the situation developed. You need to let the lender know if the hardship circumstance is temporary or permanent. Do everything you can to make the review of your request easy for the lender. Attach copies of documents that evidence your situation. For example, copies of bank statements that reflect a decrease in income or letters that support your inability to work because of a major medical condition. Anything that documents and supports your situation should be copied and included with the hardship letter. Provide the lender with your suggestion for a solution which, of course, is the outcome you are seeking. For example, “We feel that a loan modification (or short sale) would be beneficial to both of us.”
As you write the hardship letter, be sure you are honest and sincere; express your desire to keep your home if you are seeking a loan modification.
As you close the letter, be sure you thank the lender for their time and anticipated cooperation. This may seem silly to mention, but be sure you spell check the letter and read it aloud to be sure it makes sense. Remember the importance of the hardship letter as you strive to save your home from foreclosure. This letter is worthy of your time and attention.
If you feel that you need some extra guidance in crafting the hardship letter, you can do a search on the Internet and you will find many samples, both free and for a fee, that provide examples you can follow. Here’s one example: