Hardship Letter

How to write a hardship letter to support the workout process with your lender

You want to write a hardship letter to your lender, but you need to know what is considered a hardship and how to write a letter to your lender that supports the process to workout your situation?

Here are a few tips that will help you: As you may know in the meantime, during the loan workout or loan modification process this letter is one of the items your lender (or loan servicer) will ask for. It is a written explanation as to what circumstances have caused you to fall behind on your mortgage. Certain lenders may allow you to file for loan modification even if you are not behind with your payments. This topic is covered in a different section of this website.

The purpose of writing a hardship letter is to explain to your lender your 'unique' situation. Usually your lender wants to know about your monthly expenses as well. So, don't just include your mortgage payment. List all expenses that the loan modification department gets a clear picture of your financial situation.

Here are a few examples of hardships a lender may consider:

  • Medical Bills
  • Illness
  • Death
  • Death of spouse or co-borrower
  • Divorce
  • Job Relocation
  • Loss of Job
  • Reduced Income
  • Failed Business
  • Military Duty
  • Damage to Property (natural disaster or unnatural)
  • Adjustable Rate Mortgage Reset - not that uncommon yet, but that may change in the near future. Follow the press.

Here is a real example letter (some information withheld to assure privacy):

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 do that.

There are several reasons that caused us to fall behind on our payments: a) On August x, 200x my husband was laid off from his job with abc. He no longer receives Unemployment Compensation from the State of xxx as of xxx 200x. b) Since August 200x we are down to one income and were unable to keep up with the higher mortgage payments due to our escrow account from the beginning of 200x being short on funds due to raised taxes and insurance coverage in xxx County, xx. c) Since we no longer have medical coverage, I had to pay for my visits to the doctor on several occasions due to xxxx. The Doctor's Office would not see me, unless I had full payment at each visit. d) Since there is only one income left in our household, my husband helps me with my business while still looking for a comparable job and for my work I must travel a lot. Gas prices have become extremely high. If I do not travel to do presentations and meet with clients, I cannot assure growth.

It feels like catch-up for those months we fell behind and it is almost impossible. I assure you, we have every desire of retaining our home and repaying what is owed to xxxxx (Lender). But at this time we have exhausted all of our income and resources so we are turning to you for help.

Our situation is getting better because - like I stated above - my husband and I have combined forces and we are working my business together in order to ensure stability and growth in our income and we feel that a loan modification would benefit us both. We would appreciate if you can work with us to lower our delinquent amount owed and/or our mortgage payment so we can keep our home and also afford to make amends with xxxx (Lender).

We truly are looking forward to you working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully,

This example of a hardship letter is for illustration purposes only. Although it resulted in a loan modification (according to the homeowner), your case will be as specific as your circumstances and subject to approval by your lender.

However, it shows that issues can be resolved.

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