How to Write a Hardship Letter

As of last year, 6.4 million homes were in foreclosure. That number is expected to increase by one million before the end of 2012. One would think that the farther removed that the country becomes from the initial housing collapse in the fall of 2008 that the outlook of the market would be less bleak. That is unfortunately not the case. Foreclosures are expected to rise this year more than in years past mostly due to the fact that a federal lawsuit that has only recently been settled forced lenders and banks to foreclose on homes at a decelerated rate. Now these lenders are looking to play catch up. Obviously, this is rattling the homeowners in homes that are currently underwater, meaning that the balance of the mortgage on the home outdistances the market value of the home itself. Foreclosure seems imminent, and many uninformed homeowners are unaware of the measures that can be exercised in order to stave off foreclosure. One of these measures involves applying for a loan modification. This option is only plausible for homeowners who actually can afford their homes, just not under the current mortgage plan. This is an increasingly popular option, but not all applications for a loan modification are approved. It is a long, arduous process complete with some complicated steps. The first step, however, is one of the easier steps, and that is to write what is known as a hardship letter. A hardship letter is simply a letter addressed to the lender that give a detailed explanation on the homeowner’s current financial situation, and why he or she was forced to default on the mortgage as a result. If the process for applying for a loan modification is successful, homeowners and lenders can then negotiate a payment plan that fits the homeowners current finances far more comfortably. But this goal can only be attained with a well-written hardship letter that kick starts the entire process. Some homeowners don’t really know where to begin how to write such a letter though. Here are some tips. First off, one of the most important things a homeowner can do is be concise. Lenders, especially in today’s housing market, are going to be looking at several, potentially dozen of these letters. There’s no need to rewrite War and Peace. A simple two to three page explanation will do just fine. Don’t get hung up on insignificant details; just get to the point. The lender is not looking for Hemingway style prose, but that doesn’t mean the letter should not be well-written. Certainly steer clear of grammatical and spelling errors. In the end, this is a professional document, and it is better to impress. It’s also best to be as polite as possible. Remember, you are asking for assistance from an entity with no legal obligation to provide any, they will appreciate a few mentions in the letter about how kind they are to consider your application. The grounds for hardship that lenders will consider include the following: Sudden illness, unemployment, reduced income, failure of a business, job relocation, death of a family member, incarceration, divorce/marital separation, military duty, excessive medical bills and damage to the property in question. It used to be that lenders would not consider a request for a loan modification on the grounds of a reset in an adjustable rate mortgage, but since the 2008 collapse, they have been far more lenient on this issue. Many homeowners facing foreclosure are indeed able to pay off their homes, just not under their current mortgage plans. The best way for them to combat this is to start off by simply sitting at the computer and writing. Not only could this prove to be something of a cathartic experience, but it might just save an owner from foreclosure. For more information about loan modification or mortgage lawyers, check these out.