How to write a letter of great difficulty

Lenders have almost heard it all when it comes to why people have been unable to pay their mortgages. The truth is, a good hardship letter can make the difference between getting a mortgage modification (also called “restructuring”) and not getting approved for one.

(For those of you unfamiliar with the purpose of a Hardship Letter, it is to explain to the lender why you are behind on your mortgage payments and why you should have the opportunity to modify / restructure your loan.)

In this article we are going to discuss the top five reasons for hardship and the five essential elements for writing an effective hardship letter.

Reasons for financial difficulties:

Assuming we’re all on the same page with what it means to have a financial hardship (for example, you’re not even close to being able to pay your mortgage while still putting food on the table), let’s go over what Lenders consider five o’clock to be. main “acceptable explanations for difficulties”.

1. Loss or reduction of income:

A reduction in income could be due to loss of employment, reduction of working hours, reduction of salary or a decrease in the income of independent companies.

2. The financial circumstances of the household have changed:> / b>

Perhaps there has been a death in the family, a serious or chronic illness or a permanent or short-term disability that has affected one of the main employees or their dependents, increased family responsibility (such as adoption or the birth of a child or caring for older relatives / other family members).

3. Cash reserves are insufficient to maintain your mortgage loan payment and cover basic living expenses at the same time:

You may have used up all your cash reserves to pay off the mortgage and cover basic living costs. Cash reserves include assets such as cash, savings, money market funds, marketable stocks, or bonds (excluding retirement accounts), but do not include assets that serve as an emergency fund (generally equal to three monthly debt payments).

4. Monthly debt payments are excessive or overloaded with creditors:

If you’re like many of us, you may have used credit cards, home equity loans, or other types of credit to make monthly mortgage payments or pay other essential bills and have now exhausted all your available sources of credit. Another reason is that your ARM (adjustable rate mortgage) may have gone too high and now you can’t make your payments.

5. There are other reasons why it is impossible to make your mortgage payments:

There can be many other reasons, such as the incarceration of one of the borrowers, or a personal family tragedy that has made mortgage payments impossible.

It is important to review these five “hardship reasons” because when you write your hardship letter, you will be asked to explain in more detail why and how any of these situations have contributed to the fact that you are no longer able to pay your mortgage.

Five keys to writing an effective hardship letter:

Key # 1: Be honest

Being dishonest is not only morally wrong, it can also affect your chances of modifying your loan when the lender finds out (and notice what I said, when and not “if”: lenders have access to a wealth of information about you and he will not hesitate to pick up the phone and verify its veracity.

Being dishonest can happen in many ways: underreporting your income, overstating your expenses, falsifying documents, and misrepresenting difficult facts / situations (do not tell them that your husband suffered debilitating injuries in an egregious car accident that caused him to be unable to work if he was actually in a minor accident and in an unrelated event he was fired the following week).

To contradict Nike, “Just don’t do it!”

Key # 2: Be open and honest

While you don’t want to be fake, writing your hardship letter is likely to be difficult because you will have to reveal some personal skeletons that you would probably rather keep hidden in the closet.

The reason you need to be open and honest about your situation is that you want the lender to know that you really need help. If you downplay recent difficult events (for example, if your husband really had an egregious car accident that prevented him from working, don’t just say it was an accident!), The lender won’t think of you. you need to modify or restructure your loan.

If your husband is in jail, say so. If your mother had a stroke and now lives at home and you pay her medical bills, say so. If you suddenly find yourself taking care of your sister’s children so they don’t have to live on the streets, say so!

Please don’t be ashamed of being unemployed. Many people lose hope because they think the lender will not even consider working with them if they are unemployed or underemployed. This is simply not true. Many lenders will consider a Forbearance, which is a situation that allows you to temporarily pay a small amount each month until your income is stable enough to qualify for a regular loan modification / restructuring.

Key # 3: Be sincere

What I mean by this is to show the lender that you are a real human being with a real family that really needs help!

When you write your letter, go ahead and tell them the names of your children and how old they are. Tell them that your eight-year-old son, Joey, agreed to quit soccer so he could stay home and continue going to school where all his friends are. Tell them what you do for a living and tell them how difficult this last year has been. Tell them what the struggle to pay the mortgage has really been like.

It is important that you use “feeling words” to describe what is going on in your heart and head. Use phrases like “I feel like …”, “It saddens me to think that …”, “It’s frustrating …” to convey your situation. Using these words helps the lender understand your situation from your perspective.

Remember, lenders employ real people too, and they are probably in a very similar situation to you. Get them on your side by explaining what’s really going on in your home – so they feel like they’re sitting at your kitchen table with you eating macaroni and tuna for the fifth night in a row, since that’s all it’s been. she has been able to pay since her husband was laid off three months ago.

Key # 4: Be courteous

In your letter, it is imperative that you use courteous and positive language. Nobody wants to read a letter full of negativity and cursing.

Yes, your situation is probably really difficult and yes, your lender probably had something to do with getting you a loan that you couldn’t pay, but now is not the time to point it out. No finger pointing, no blaming, no “passing the buck” … now is the time to be positive and polite when asking for a modification.

One other thing to point out: I’m sure you’ve practiced a million times what you’d like to say to “Sonofa ___” … well, never mind, but suffice it to say, your hardship letter is not the place to see how many expletives you can join in a row. No bad words. Period.

Remember to use your “Dear Sir / Madam” to begin the letter, and your best “Thank you from the bottom of my heart for your consideration” to close. Bottom line: be polite and your letter will carry more weight.

Key # 5: Be reasonable

If you think you can afford a payment of $ 1200 a month, say so. And if you think you can afford a payment of $ 1200 a month, don’t tell them you can only pay $ 600! Remember that they will review your bank statements, your spending habits, your monthly bills, and your take-home pay to justify a reasonable mortgage amount. If they think you are getting greedy and trying to “get the system going” to get the cheapest mortgage payment possible, regardless of what you can afford, they will immediately reject your application.

You must be reasonable in your request; you must understand that you must meet the lender halfway, here. They must give up demanding an amount of $ x per month and you must give up cable TV and any other nonessential luxury in order to pay your mortgage.

Go ahead and tell them that you think the 15% interest on your second loan is unaffordable and that you prefer a 5% interest rate instead, but don’t ask them to take $ 100,000 off your $ 200,000 mortgage because that’s the amount you’re backwards. Remember that the lender has to answer to his investor, so he must be fair to both him and you.

You should also use the hardship letter as an opportunity to reiterate what you have already given up in order to free up funds to make your mortgage payments. You will also want to point out what else you are willing to give up to keep your home. The timeshare? Let it exclude. The family boat? Sell ​​it for a loss. Suzy’s dance lessons? Sorry dear, next year. Whatever it takes, tell the lender that you are willing to do it to keep your home.