A mortgage hardship letter is a formal way to request a modification to a mortgage 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.
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.
Two Main Reasons
The two main reasons a borrower needs modification on a mortgage are job loss and medical issues. 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 mortgage hardship 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.
state the reason for the hardship
The reason for the hardship should be stated matter-of-factly. 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 mortgage hardship letter may be the single most important factor in whether a lender will modify 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 hardship letter is being written by a loan modification 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.
There are a few things that should not be included in a mortgage hardship 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.
Below is a sample mortgage hardship letter. Since it is a formal document and will become part of the borrower’s and lender’s permanent file, it should be written in formal business style and sent by certified mail. The letter should be succinct and not more than one page. The borrower should keep a copy of the letter as well as the receipt that proves the lender received it.
Sample mortgage hardship letter
2300 Walnut Street
Philadelphia, PA, 19050
April 10, 2019
ABC Lending Institution
5457 Hayward Lane
Philadelphia, PA, 19051
RE: Mortgage Hardship
Dear Ms. Wilson:
This letter is a formal request for modification of my mortgage. I have fallen behind in payments for the last three months because my wife, Tammy Chicago, lost her job, which reduced our total income by half. I made the last payment on 01/01/2019.
I sincerely want to keep my home and make regular payments, but, at this time, require some modification 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 555-333-0009 or at firstname.lastname@example.org if you have any further questions. I hope we can meet soon to agree on the terms of a loan modification.