How to write an explanation letter for a problem. In a letter of hardship, a mortgage holder explains the circumstances that led to the default on their loan and the need to sell their home for an amount that is less than what is owed on it. The things that you have done to try to improve your situation, the reasons why it cannot be improved any more, the cause of the current financial status, and the changes that have occurred in the real estate market since the initial loan should all be mentioned in the explanation. In the letter, please refrain from venting your aggravation, criticising the bank, seeking to broker a deal, or making a political statement. Also, please refrain from making any political statements.
If you have reached the point where you need to consider a short sale, you will need to write a letter explaining your financial predicament and send it to your lender. In a letter of hardship, a mortgage holder explains the circumstances that led to the default on their loan and the need to sell their home for an amount that is less than what is owed on it.
The tone of the very best letters is one of pleading before a judge. It lays out the evidence that can be used to convince your mortgage company to accept a loan modification or short sale rather of going through with the foreclosure process.
Main points
In a letter of hardship, a mortgage holder explains the circumstances that led to the default on their loan and the need to sell their home for an amount that is less than what is owed on it.
Difficult times can be brought on by a multitude of factors, including but not limited to the following: lack of job, a fall in income, a death in the family, a divorce, active duty in the armed forces, or incarceration.
In the majority of situations, hardship letters describe how your current financial situation came about, how the housing market has evolved, what you’ve done to attempt to improve it, and why it can’t be improved any further. In addition, hardship letters explain why it is no longer possible to improve your situation.
You shouldn’t try to negotiate a bargain or make a political statement in the letter, and you shouldn’t use it as an outlet for your frustration either.
What Constitutes an Attempt at Difficulty?
Even if having a mortgage that is greater than the value of the home is one of the prerequisites for a short sale, a bank is not required to agree with you if you assert that the value of your home is less than the amount that is owed on the mortgage. In point of fact, mortgage holders who seek to evacuate their property or change the terms of their loan simply because the asset is no longer worth what they paid for it are likely to run into resistance from the lenders that hold their loans.
Because it is against the law to commit fraud, it is imperative that you evaluate whether or not you are, in fact, going through tough times. Indicate in the letter of hardship the particular occurrences or shifts in conditions that have rendered it impossible to continue paying mortgage payments and maintaining the home in accordance with the terms of the existing loan.
The following are some examples of challenges that you might face, which might help you get your short sale approved:
Unemployment
A decrease in income that is the result of a furlough, a new job, the loss of your partner’s career, or a salary cut an illness or other unexpected medical issue that requires immediate medical attention
A new job, divorce, or a separation from your spouse are all examples of life changes.
A death in the family, particularly one of the primary breadwinners; a significant change in the terms of a mortgage, such as the use of an adjustable-rate mortgage;
A career in the armed forces
Incapacitation results in increasing expenses and unsustainable debt. Significant home maintenance or repairs must be completed before incarceration.
Maintaining your credit score is not as high of a priority for lenders as getting their money back, or at least as much of it as they can, as opposed to getting their money back. According to the letter you wrote explaining your predicament, the most effective way for the lender to accomplish this would be for them to comply with your request for a loan modification or a short sale.
Several things to think about
The typical length of a hardship letter is just one page. They need to address each of the following important points in their response:
What were the events that led up to the current monetary crisis?
What different aspects of the real estate market have emerged since the first funding?
What steps have you taken to try to make things better and how successful have you been?
Why is it that it can’t be enhanced much further?
It is possible that the lender will want proof from you, such as pay stubs, tax records, or bank accounts, in order to demonstrate that you are unable to fully repay the mortgage. It is a good idea to support your case that you cannot sell your house for enough money to pay the costs by citing comparable sales from an agent. This may be done in a number of different ways.
How to Compose a Letter Expressing Your Pain and Anguish
Being on the edge of filing for bankruptcy or losing your home to foreclosure is a terrible situation to be in, but it is essential that the lender hears your side of the story. No matter how horrible it is, you should still share it.Be succinct and specific about the implications of the circumstances that led to your current predicament as you describe the events that caused it. Using both numbers and percentages, please explain the decrease in income or the negative cash flow.
Include each dollar figure as well as the origin of the debt (whether it came through a loan, cash advance, or credit card), and create the most negative but honest image possible when expressing the sums that were borrowed in the past to clear the debt. Draw the worst possible image imaginable while still being honest. Take, for example:
My employment ended abruptly about eight months ago. Since then, I have maxed up all of my credit cards, and in order to keep up with the payments, I had to take out a loan for $10,000 against my credit cards. My automobile requires a total makeover. Since our cat Spiro was diagnosed with cancer, we owe the veterinarian the sum of $3,000. Peanut butter sandwiches are the only thing that the children consume, and I’ve worn out my fingernails scrubbing the floors of other people so that I may put some money in the bank while I hunt for a better job. My elderly mother, who requires regular medical attention, also resides with my family and we take care of her as best we can.
Some lenders prefer a letter to an affidavit. If you make false statements on an affidavit, the consequences will be more severe in the court of law.
Include the following information, whether it’s in an affidavit or a letter: your name, address, phone number, date, and loan number; a brief introduction asking for permission to sell your home in a short sale; specifics regarding your financial hardship; prices of recently sold homes in the area; a claim that the only other option is foreclosure; and a statement that you would like to meet your financial obligations if you are able to.
Inaccuracies Found in the Hardship Letters
You shouldn’t try to negotiate a bargain or make a political statement in the letter, and you shouldn’t use it as an outlet for your frustration either. Avoid making statements such as “family members will lend the money” or “I have a hidden account with additional funds.” Avoid making statements such as “family members will lend the money.” When you do this, there is a possibility that the bank will check up on these items and ask for additional cash in order for the sale to be finalized.
If you assure the bank that things will become better in the near future, this is a perfect cause for the bank to refuse your application. It is important to keep in mind that the lending institution will jump at any sign that a homeowner will once again be able to sustain themselves financially.In your letter explaining your suffering, you shouldn’t have a positive tone.
The inferences drawn
It is possible that discussing your difficult financial status can make you feel depressed. You will also be required to reveal your troubles to a lender, which may come seem as intrusive to you.
Writing your letter of hardship may still be able to assist you in comprehending how the alteration has impacted your life and may even make it possible for you to make adjustments for the best in the foreseeable future.
