What makes a good hardship letter

Focus only on events that happened since you took out the mortgage and that have directly influenced your income that would be used to make your mortgage payment. If you refinanced your loan in , it is irrelevant to list a job loss or the conversion from working wages to social security if that took place in Stating a pre-existing hardship does nothing to explain why payments were made after origination and will be missed without intervention moving forward.

Furthermore, if the reasons why the payments are difficult pre-date the delinquency, it will seen as more an issue of over-financing or an inability to react financially - and not the unavoidable circumstantial hardship the lender is concerned with remedying. Provide detailed feedback as to when the hardship occurred and how much it affected you. An example would be to state the exact date that you lost a specific job title and the date you replaced it with another, further detailing the percentage of income that was lost.

State why the lender must help you in order to avoid default. Alternatives to default, as your lender sees it, include refinancing the loan, depleting savings to stay current, and even selling the property if the current market would allow you to repay the loan by doing so.

Touch on any of these that are applicable. A refinance isn't possible if you can't qualify or you don't have enough equity in the home. Continuing to pay isn't possible if you have exhausted savings and have sold off items like recreational toys, secondary cars, and collectables. Selling the home may not be mutually beneficial if the mortgaged amount exceeds the potential sales price plus the cost of paying a realtor.

Your mortgage company will likely need more than just your word that you will be successful with payments before approving a major contractual addendum like a modification. A financial hardship occurs when a person cannot make payments toward their debt, and the financial hardship letter can help explain why your account is behind. Creditors may use them to determine whether or not to offer relief through reduced, deferred, or suspended payments. There are various situations that may qualify as a hardship.

The most common examples are illness or injury, loss of income, natural disasters, divorce or death and military deployment. However, it matters less what your reason is, and more that you are honest about it and willing to find a solution for repaying what you owe. What are you going to ask for specifically? There are several requests you can make from your creditor, collection agency, or mortgage lender, including: suspending past due amounts, bringing your account current, lowering your regular payment amount or considering a settlement option.

The purpose of a hardship letter is to convey a sense of sincerity and commitment to your lender. It needs to come from the heart…your heart. If you say anything in the letter that seems false or is obviously untrue, be prepared to get rejected. The first paragraph should focus on introducing yourself and your particular situation. This will be the section that explains exactly what your hardship is and establish your desire to work with the lender to continue paying off your debts.

During this time, our emergency savings were exhausted and we fell behind on our debts. Now that I am healed from my injury and ready to return to work, I believe I could resume regular payments if you would make adjustments to our loan.

This paragraph works because it is brief. It also mentions that the borrower would be ready to resume payments if given a modification. Of course, not every situation will be resolved. For example, you might not have an injury that has fully healed. Because of this loss of income, I have fallen behind on my mortgage payments and sunk into credit card debt to stay afloat. Again, the focus is on explaining quickly what happened and why the borrower has fallen behind on your payments. It also mentioned that they believe they can resume making payments if the creditor agrees to work with them.

This paragraph is a great example of mentioning two types of adversities — a life event hardship and a mortgage hardship. If you have multiple hardships that contribute to your situation, you should list them all. Of course, try to avoid too many paragraphs and long, unbroken narratives. The second paragraph will focus on what you have done or are currently doing to resolve your hardship and keep up with your obligations. Be clear and honest when describing the steps you have taken so far.

Avoid holding back and minimizing your situation. Now that my divorce is final, my income and expenses have stabilized. Remember, the goal of the letter is to get some kind of help from your creditor. The letter has to establish that you need that help if you are going to succeed.

This is the paragraph where you can directly ask what you expect the lender to do. Short and to the point, this message tells the lender exactly what you expect, and what they should consider.

The last paragraph is your conclusion. This is your chance to sincerely thank the lender for their time and express your hopes of working with them in the future to solve your joint problem. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Table of Contents Expand. Table of Contents.

What Constitutes Hardship? Points to Address. How to Word the Hardship Letter. Hardship Letter Mistakes. The Bottom Line. By Elizabeth Weintraub. Learn about our editorial policies. Reviewed by David Kindness. Article Reviewed September 30,