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A request letter for loan restructuring is a formal way to request a restructuring to a loan. This letter is the place where the borrower can express his or her financial troubles in personal terms to have the best chance to stop a foreclosure or receive better terms on an outstanding loan.
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Banks and other lenders don’t want to know the life history of a borrower, but they want to know that he or she has a legitimate reason for requesting help.
2 Most common Reasons For loan restructuring
Job loss and medical concerns are the two most common causes for a borrower’s debt to be restructured.
However, other reasons may be divorce, death of a spouse, a newborn child, military duty and relocation. Other possibilities are a failed business or a business that is suffering from an economic slowdown.
Borrowers need to remember that lenders will usually only help if there is something in it for them.
Most lenders are not interested in owning and maintaining property or repossessing a virtually worthless car, so they look for ways to avoid a foreclosure lawsuit.
The borrower should clearly explain that due to his or her financial situation, they need help and are not trying to avoid paying their debt.
The letter should have a positive tone that gives the impression that the person is a solid borrower who wants to pay his or her debts and do the right thing.
This is not the place to complain about life’s slings and arrows. The reason for the hardship should be stated matter-of-factly.
Need To Give Proof
The borrower should clearly state the ways in which he or she is planning to correct their financial situation.
They may need to give proof that they are searching for a job, or give medical records that show they will be able to work at a specified time.
The letter may be the single most important factor in whether a lender will restructure a loan.
The lender will want to see the following questions answered:
- Why did the borrower fall behind in payments
- When did the borrower fall behind in payments with specific dates
- Will the financial difficulties be improved and when and how
- What modifications does the borrower want
- How much can the borrower afford to pay on the loan
- If the financial hardship is due to gambling or alcohol, is treatment being sought
If the letter is being written by a loan restructuring consultant such as an attorney, mortgage broker or realtor, it should be written in the first person voice for the borrower, and the borrower should sign the letter. Personal letters are more likely to be viewed as genuine and not from a template.
Details Of Hardship
There are a few things that should not be included in a loan restructuring request letter. First, the letter should not give a long and detailed narration of the hardship.
The letter should clearly state the facts of the hardship and not exaggerate it. The letter should be honest and not put the blame on someone else for the difficulty.
Sample 1 – Loan Restructuring Request Letter
[Name of Borrower]
[Address of Borrower]
[City, State, Zip Code]
[DATE]
[Name of Loan Officer]
[Name of Lending Institution]
[Address of Lending Institution]
[City, State, Zip Code]
Re: Restructuring of Mortgage – [Mortgage Number]
Dear [Name of Loan Officer]:
This letter is a formal request for restructuring of my mortgage. I have fallen behind in payments for the last three months because my wife, Name of Wife, lost her job, which reduced our total income by half. I made the last payment on [DATE].
I sincerely want to keep my home and make regular payments, but, at this time, require some restructuring in the terms of the loan.
I request that the monthly payments be reduced and the delinquent payments be forgiven or recapitalized, so I can catch up and prevent delinquency in the future.
I would appreciate it if we could work together to find a way to normalize my mortgage payments.
I fully intend to pay my debt, but need some help until my wife finds another job and our financial situation stabilizes again. She currently has two possible job offers, and will know the results next month.
I apologize for getting behind in my payments, but, as you can see, it was out of my control.
I can be reached at [Phone Number] or at [Email Address] if you have any further questions. I hope we can meet soon to agree on the terms of a loan restructuring.
Sincerely,
[Signature of Borrower]
[Printed name of Borrower]
Sample 2 – Loan Restructuring Request Letter
[Name of Borrower]
[Address of Borrower]
[City, State, Zip Code]
[DATE]
[Name of Lender]
[Name of Lending Institution if Applicable]
[Address of Lender or Institution]
[City, State, Zip Code]
Re: Restructuring of Car Loan – [Loan Number]
The aim of this letter is to reduce my car loan payments from [AMOUNT] to [AMOUNT] for the next six months.
When I got the loan, my income was [AMOUNT], but because of an illness, I lost my part-time job, so my income is only [AMOUNT] today. I have enclosed my medical report that clearly shows I was hospitalized for four days.
I am fully recovered from my illness and plan to get another part-time job to supplement the income from my work-at-home job.
For the past two months, I have used my savings to maintain my car loan payments, but my savings account is almost empty.
I believe I can continue to make full payments in about six months starting on [DATE] if I can have some reduction in the amount I pay during that time.
I request to reduce my payment by [$150] from [$400] per month to [$250] per month for six months starting on [DATE] and ending on [DATE]. As of [DATE], I will continue to pay the full [$400] per month.
Thank you for considering my request. I can be reached at [Phone Number] or at [Email Address] if you have any questions or require any more documentation.
Sincerely,
[Signature of Borrower]
[Printed Name of Borrower]
List of Enclosures: Medical report
Sample 3 – Loan Restructuring Request Letter
Name of Lending Institution
Loss Mitigation Department
Name of Person
Mailing Address
Date
To: Name of Person
Re: Restructuring of Mortgage Loan – Loan Number
Due to recent, serious changes in my health, I have lost income, which is the reason I am behind in making my mortgage payments.
We want to keep our home and fully intend to pay the mortgage, but we would like to renegotiate the terms of the home loan to avoid foreclosure and hope that you can help make this possible.
I would be happy to discuss the situation with you at your earliest convenience and try to find a solution.
Enclose please find doctor’s records concerning my disability as well as financial statements that demonstrate our reduced financial position.
Please call me at any time at 555 123 4567 or send an email to name@email.com.
Sincerely,