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A financial hardship letter should explain to your lender why you are in financial distress and your capacity to resolve it. There are different reasons for writing a hardship letter, but the most common these days are for the purposes of requesting a loan modification or short sale to avoid foreclosure. In fact, the “hardship letter” or “hardship affidavit”, written by the homeowner, is required in the loan modification process, even if you have a foreclosure defense attorney representing you. A foreclosure defense or loss mitigation attorney can assist you with writing this letter and will submit it along with your other financial documents, so that they can present the strongest possible case to your lender.

When writing a hardship letter for a loan modification, keep in mind that lenders want to know why you have fallen behind with your mortgage payments. Your explanation should be clear, honest, and contain just the right amount of detail. Perhaps more importantly, lenders want to know how you will sustain your payments going forward, if they decide to modify your loan. Both of these explanations are crucial to convincing a lender why it is in their best interest to modify your loan instead of moving forward with foreclosure. A good foreclosure defense law firm will have staff members that can assist you.

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Here’s how you can write a hardship letter that gets your point across and gets you the best loan modification results possible.

Keep it concise:

A typical lender will spend less than five minutes reading your letter. Keep it to a single page; any longer and they might not read the entire letter. Eliminate all unnecessary details and keep only those that are relevant to your case. Your foreclosure attorney can help you tighten up the wording.

Make a specific request:

Start by stating the purpose of your letter (whether it’s a loan modification or a short sale), so your lender knows what you want. It should say something like “I need to restructure my mortgage and obtain a lower, fixed interest rate…,” in a way that compels them to find out why. Use subsequent paragraphs to explain your case in detail.

Explain your hardship(s):

First, make sure your hardship qualifies as a financial hardship. You must convince your lender that you have no other means of mortgage assistance, and that you will stay on track if they grant your request. Financial hardship is typically a loss of income or major expenses that were unexpected or beyond your control.Examples of valid hardships include:

  • Loss of Income
  • Illness and Medical expenses
  • Death of a family member or co-borrower
  • Divorce/Separation
  • Other legal expenses
  • Military Service

See the MHA defined list of qualifying hardships.

This list includes some of the most common examples of hardships, but is by no means all inclusive. Each lender has its own standards, and the purpose of the letter is to give them a personal look into your situation. Once you have established your hardship, provide details that will strengthen your case. Make sure to tell them how you got into the situation and why it was out of your control. Also, if you have more than one hardship contributing to your difficulties, be sure to include all hardships in your letter.

Restate your request:

It is best to end your letter by summarizing your purpose. Your previous paragraphs will have already explained that it is the only way to prevent foreclosure. Make it clear that you will maintain your regular payments once the loan has been modified and reinstated.

Humility works:

Ultimately, your lender makes the final decision regarding loan modification. Never imply that your situation is your lender’s fault. Simply state the facts and leave the judgment to your reader.

Finally, thank them in advance and mention that you’re looking forward to continuing business with them. Keep the letter to one page in length or it may actually hurt your chances. An effective foreclosure lawyer will have staff members that can assist you with writing this letter.


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