Hardship Letter - Outline

Do you know how to write effective hardship letters? It's been proven that a well-written hardship letter will make a positive impact on the approval of your mortgage loan modification application. Follow the outline below in order to increase your chances of getting approved.

The Three S's:  Setback, Struggle, Solution

Your bank's loss mitigation representatives are more than likely overworked, overwhelmed, and underpaid. So the easier you make their job, the better it is for you. One of the ways you can do this is by writing your hardship letter in such a way that gives them the correct information in an organized and succint fashion. The main ingredients they are looking for in your letter are: the setback, the struggle, and the solution.

The Setback

The lender wants to know what happened in your life that led you to stop making your payments. Your written description has to make sense and it must be consistent with the financial documents (bank statements, paystubs, etc)that you are required to submit for their review. Make sure you include the following under your setback explanation.
  1. What happened? Did you lose your job, have unexpected health issues, divorce, suffer a paycut, death in the family, etc.
  2. When did your setback start?  Did you make an attempt to keep things going and used your reserves and other resources until you've run out?
  3. It's also helpful to quantify how much your income has been reduced.

The Struggle

This is the part in your hardship letter where you describe to your lender the measures you've taken to remedy your situation.  
  1. If you've suffered an income loss, have you cut back on your household and personal expenses in order to try to make your mortgage payments?  Make sure you let your lender know that you've reduced your expenses in every way you possibly could and that you have not made any frivolous purchases while suffering your setback.
  2. In addition to having made major reduction in your expenses, also let the lender know if you've made an attempt to increase your income by taking on a second job, or any freelance work to help make ends meet.

The Solution

How do you plan to recover from your setback?  Your lender will want to read in your hardship letter that you have made a good effort to come up with a viable plan to get back on your feet so that if they grant you a loan modification approval, you will be able to pay your mortgage loan in a timely manner every month.  

If you give any reason for your lender to doubt your ability to recover at all ,  your loan modification may be denied.  
  1. What steps are you taking to increase your income in the future?  Are you looking for a new employment? a second job?
  2. If your hours have been cut at work, do you anticipate them to be increased in the future?  When?
  3. Do you plan to rent out some rooms in your home to get income?
  4. If your spouse is not working, will he/she be looking for a job?
  5. If you are experiencing health issues, when will you recover fully?
  6. Also, state how much you would like your mortgage payments to be reduced to make it affordable with your current level of income.

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