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How to Write a Hardship Letter for Mortgage Modification

A hardship letter is a document required by almost every lender before they will approve a request to modify a loan. When a lender agrees to modify the original terms of a mortgage document, they usually do so for the financial benefit of the borrower, meaning the lender loses money, or at least they don’t make as much money as they originally wanted. A hardship letter justifies the borrower’s request to have their loan terms modified and lower their monthly payment. Since lenders lose money by modifying a loan, they generally want to make sure that only those who truly need help receive the benefits of a modification.

A loan modification application is a very important document for many borrowers. The outcome of a loan modification request can negatively or positively impact several major life decisions of borrowers. Because the loan modification can be so important, it is very important that borrowers submit every piece of required documentation in the proper format, including the hardship letter. The important part about the hardship letter is lending a voice to the numbers. Any lender can see from a collection of pay stubs that a person makes less now than before, but the hardship letter is the borrower’s chance to tell their side of the story and show the lender how a modification of their loan will help them through their financial rut. Due to the weight that a well written hardship letter can carry, many borrowers wonder exactly how to write a hardship letter for mortgage modification.

Anyone who needs to write a hardship letter for a modification should keep in mind that a hardship letter is not meant to be a giant sob story or a novel length manuscript. Keep the length of the letter down to a few paragraphs; two or three will be ideal. Only describe the hardship that is mostly responsible for the impending foreclosure, such as a job loss or a recent divorce. Save the talk about your mother for your therapist, not your lender, and especially not in a hardship letter for a loan modification application.

Lenders especially like to see that the borrower has a plan for the future and they like to see that the borrower has the drive to make those plans be realized. For example, a person who was recently laid off due to company cut backs can describe their efforts for finding employment. They should let the lender know how many interviews have been scheduled and of any offers for employment already on the table. Those who are facing foreclosure because of a divorce can let the lenders know that they are adjusting to single life by cutting back on personal expenses and learning how to better budget their money while exploring new career or second job options. Painting a picture of a financially responsible borrower who has just fallen on hard times is better than painting a picture of a lazy borrower with no intention of every trying to get out of debt. From the lender’s perspective, the responsible borrower bears less of a risk than the lazy one.

As always, try to have a third party review all of the documents needed for a loan modification prior to submitting the application. A person’s best bet is to have an experienced financial or real estate attorney look over the package because they will have more experience dealing with lenders and more knowledge about what certain lenders look for and what kind of loan modification applications have the highest chance of success.