Important Requirement For Successful Loan Modification

One of the items your lender will ask for during the loan modification process is a "Hardship Letter". A hardship letter is a written explanation as to what "event" has caused you to fall behind on your mortgage and it is vital in helping you stop foreclosure.

This letter acts much like an outline or biography of your current "life" issues that are affecting your ability to meet your financial obligations. Once thing to note....as you comprise the hardship letter for your lender...keep it concise and to the point. With the current foreclosure crisis, lenders are seeing thousands of these letters. They are extremely busy and back logged. Do not write a "book", as it could very well get over-looked.

To follow is a partial list of hardships that lenders consider during the loan modification process:

Adjustable Rate Mortgage Reset-Payment Shock
Illness
Lost of Job
Reduced Income
Failed Business
Job Relocation
Death of a Spouse or Co-Borrower
Death
Incarceration
Divorce
Martial Separation
Military Duty
Reduced Income
Medical Bills
Damage to Property

Now that you see what your lender is looking for, it is time to sit down and write a hardship letter. I have made it easier by giving you a couple of examples to work with...However make it unique to your situation. You still have to make it legit...The hardship letter is only one part of the equation, but it is key in helping you avoid foreclosure. You will still have to jump through a few hurdles with your lender before they will approve any type of loan modification.

Here are two examples of "Hardship Letters":

Example #1...
Name
Address
Lender Name
Loan #

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to dot that.

The main reason that caused us to be late is (insert here and don't be too lengthy). soon after being late and our income not being nearly enough, we had fallen further and further behind. Now it is to the point where we cannot afford to pay what is owed to(insert lender's name). It is our full intention to pay what we owe. but at this time we have exhausted all of our income and resources so we are turning to you for help.

(the approximate date of hardship and we believe that our situation is [temporary or is permanent]}.

Our situation has improved because (insert reason) and we feel that ha loan modification would benefit us both. We would appreciate if you can work with us to lower the delinquent amount owed and/or payment so we can keep our home and also afford to make amends with your firm.

We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully

Borrowers signature)
Date
Co-Borrower's signature
Date

Example #2...
Date
To: (Lender)

RE: Loam Modification

Due to the recent adjustment to the mortgage I currently have with your company, I am finding it very difficult to afford the new payment. I have a three year fixed rate which is now adjustable and is scheduled to adjust again in(insert date)

Considering my current income, there will be no way I can afford the increased payments come February. Hopefully there is a way to renegotiate the terms of my current mortgage to avoid default and foreclosure.

Is it possible to have my current adjustable rate mortgage converted to a fixed rate?
If this is not possible can the next rate change be postponed to a future date to allow me to hopefully refinance? Any other solution you could provide would be greatly appreciated.

I have had no problem making my payments for over three years and do not want to change that pattern. My mortgage was originally written by another company and bought by (insert lender). The original mortgage terms are terrible but it was the only loan I was qualified for at the time. I was assured that refinancing would be no problem but that turned out not to be true due to the downturn of the housing industry.

The main problem is that my property is now worth about 5-10% less than what I paid for it, which is preventing me from being able to refinance. I was researching on the internet and came across the Fannie Mae announcement regarding the servicing of conventional mortgage modification.

I believe this addresses the situation I currently find myself in along with many other homeowners. Attached are recent pay stubs showing my current income.

Thank-you for your time and consideration.

Sincerely & Respectfully'

(Your Nam)


Writing a complete, concise letter of hardship is essential to completing a successful loan modification. Making it convincing and honest is of utmost importance...