How to draft a letter of difficulty A hardship letter discusses the circumstances leading to a mortgage holder’s loan default and their need to sell their house for less than what is owed. What you have done to try to better your situation, why it cannot be improved further, how the current financial condition originated, and changes in the real estate market since the original loan should all be covered. Please refrain from venting your frustration, attacking the bank, attempting to strike a deal or making a political statement in the letter.
You will need to prepare a hardship letter to your lender if you reach the stage where you have to think about a short sale. A hardship letter discusses the circumstances leading to a mortgage holder’s loan default and their need to sell their house for less than what is owed.
The finest letters have a legal pleading feel to them. It outlines the facts in order to persuade your mortgage company to approve a short sale or loan modification rather than foreclosing.
- A hardship letter discusses the circumstances leading to a mortgage holder’s loan default and their need to sell their house for less than what is owed.
- Unemployment, a decline in income, a death in the family, a divorce, military duty, being imprisoned, or other circumstances can all cause hardship.
- In most cases, hardship letters explain how your current financial situation came about, how the housing market has evolved, what you’ve done to try to improve it, and why it can’t be improved any more.
- Do not attempt to negotiate a deal or a political statement or use the letter as an outlet for your resentment.
What Qualifies as Hardship?
A bank is under no duty to concur with you when you claim your home is worth less than the mortgage sum on it, even though an underwater mortgage is one of the requirements for a short sale. In reality, mortgage holders who wish to vacate their home or change the conditions of their loan simply because the asset is no longer worth what they bought it for are likely to face opposition from lenders.
Because fraud is illegal, it’s critical for you to determine whether you are indeed experiencing hardship. Indicate in the hardship letter the specific events or changes in circumstances that make it impossible to continue making mortgage payments and maintaining the home under the terms of the present loan.
The following examples of difficulties could aid in getting your short sale approved:
- An income reduction brought on by a furlough, a new job, the loss of your partner’s work, or a salary cut
- a disease or other emergency medical situation
- A change of jobs
- divorce or separation from your spouse
- A death in the family, especially the main breadwinner
- a significant change in the terms of a mortgage, such as an adjustable-rate mortgage
- A military career
- increased costs and unmanageable debt.
- is a requirement for significant home maintenance or repairs.
Lenders are more concerned with getting their money back, or as much of it as they can, than they are with maintaining your credit score. According to your hardship letter, the best method for the lender to be able to achieve that is for them to grant the request for a loan modification or short sale.
Points to consider
Hardship letters are frequently only one page long. They ought to cover each of the following significant points:
- What led to the current financial predicament?
- What has changed since the initial funding in the real estate market?
- What actions did you take to try to make things better?
- Why can’t it be improved further?
To demonstrate your inability to fully repay the mortgage, the lender may ask for proof such as pay stubs, tax returns, or bank statements. It’s a good idea to support your argument that you can’t sell your house for enough money to pay the charges by citing comparable sales from an agent.
How to Write a Letter of Suffering
It’s a dreadful situation to be in to be on the verge of bankruptcy or foreclosure, but it’s critical the lender hears your tale. Share it, no matter how unpleasant it is.When outlining the incidents that have put you through hardship, be concise and clear about their effects. Explain the loss of income or negative cash flow using dollars and percentages.
Draw the worst but honest image possible when stating the sums borrowed in the past to settle the debt; include each dollar amount and the source of the debt (whether it came from a loan, cash advance, or credit card). For instance,
Eight months ago, I lost my job. Since then, I’ve used my credit cards to the fullest extent possible and had to borrow $10,000 against them to make payments. My automobile requires a complete makeover. We owe the veterinarian $3,000 since our cat Spiro had cancer. The only food the kids eat is peanut butter sandwiches, and I have worn-out fingernails from cleaning other people’s floors to get some money while I look for a better job. Also residing with my family is my elderly mother, who requires ongoing medical attention.
Some lenders prefer a letter to an affidavit. If you lie on an affidavit, there will be more serious legal repercussions.
Include the following information, whether it’s an affidavit or a letter: name, address, phone number, date, loan number; a brief introduction asking for permission to sell your home in a short sale; details of 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 could.
Errors in Hardship Letters
Do not attempt to negotiate a deal or a political statement or use the letter as an outlet for your resentment. Avoid criticizing the bank, saying that family members will lend the money, or claiming that you have a hidden account with additional funds. By doing this, you run the risk of the bank checking up on these things and requesting more cash to finish the sale.
An excellent reason for the bank to reject you is if you make promises that things will improve shortly. Remember that the lender will seize upon any indication that a homeowner will once again be able to support themselves financially.You shouldn’t be upbeat in your hardship letter.
It could be depressing to talk about your bad financial situation. And it might seem intrusive to you to have to disclose your difficulties to a lender.
Writing your hardship letter might still help you understand how the shift has affected your life and may even enable you to change things up for the better in the future.