When it comes to loan modification, what does an effective hardship letter look like?
A good hardship letter written for the purpose of receiving a loan modification will be unique and personal, and will explain your desperate situation. You must demonstrate, within your letter, the reason you have fallen behind on your payments, and the reason must be a legitimate reason like the following:
o Loss of your job
o Relocation of your job that results in two mortgage payments
o A job change
o A long term heath problem
o A death in the family
You must cast embarrassment to the side when preparing your hardship letter for your loan modification. Remember, at some point, everyone experiences a financial hardship.
Be detailed in how your situation came about and how it has resulted in your inability to make your payments as they currently are; leading to you requesting a loan modification. If possible, it’s always a great idea to list the ways you’ve attempted to keep up with your current mortgage payments such as:
o Tapping into your savings
o Tapping into your retirement funds
o Renting out rooms in your home (If you are unable to rent rooms because you do not have any rooms to rent, mention that as well.)
After you’ve listed the measures you’ve taken to avoid being delinquent on your loan payments, you must ask your lender for help. As I am sure your story truly is, do not forget to be honest, heartbreaking, and very, very detailed. Other humans will be receiving and reading your letter requesting your loan modification, and compassion can and will play into their decision.
Final Reminders for Preparing yourEffective Hardship Letter
It is always to your benefit to remind your lender that a forbearance agreement, loan workout, or short sale is a much better alternative than allowing the home to go into foreclosure. Be honest, and if you feel that in the near future you’ll be able to afford payments once you exit your current situation, tell that to the lender! If you can get out of your problem situation within six months, the bank may be more likely to consider a loan modification.
Finally, do not under any circumstances lie on your hardship letter. You have to remember that everything you state within that letter to request your loan modification must be able to be proven with bank statements, credit card statements, and any other documentation requested by the bank. Your bank most likely will comb through your finances a little more thoroughly this time, as opposed to when you were originally granted the loan. Most importantly (regarding being honest), if you haven’t told the truth on your loan modification application, you may be turned over for mortgage fraud.
Effective Hardship Letter Example
Type of Letter: Loan Modification
1st/2nd/Heloc: 1st mortgage
Type of Hardship: Utilities, caring for family member
Property Category: Primary Residence
Lender: Wells Fargo
Loss Mitigation Department
Wells Fargo Home Mortgage
P.O. Box 10335
Des Moines, IA 50306
To Whom It May Concern:
Re: Request for Loan Modification for property at ________________________.
Loan Number: ______________.
I am writing for help with my mortgage. I have had a several issues that have made making my payments challenging. The first hardship involves the age of my home; because the home is fairly old, the utility bills during the winter months have been excessively high. It is a struggle just to accommodate this financial shock. Also, my mother recently underwent hip surgery, from which she is recovering. I am her primary caregiver, and I am responsible for her monthly living expenses. This has stretched my budget even thinner than it was.
My current debt-to-income ratio is __%, which is clearly not sustainable.
Status of payments/ Ability to pay going forward:
While my situation is disheartening, I’m doing all I can to get by. To reduce expenses. I have researched more energy efficient ways to use water, heating and air, and this has reduced my utility bills. I am also actively looking for a second job and a possible roommate to further supplement my income. With the help of a credit counselor, I have worked out a payment plan for paying off my debt. I feel all of these approaches will enable me to pay my mortgage if I’m allowed a reduction to my mortgage payment. If you can provide this, I know that I can get back on my feet again.
Due to the financial hardships I’m facing, I am asking for a reduction in my mortgage payment to around ___$ a month, including taxes, insurance, etc. I have consulted both a financial advisor and a credit counselor to come to this amount. If I can arrange this, I am confident that my situation will continue to improve and that I will be able to reliably make the payments on my home. I am a hard-working home-owner, and I have had good payment history up until now.
I very much appreciate your consideration of my request. My contact information is below. Please let me know what further information you need and I will promptly provide it.
Thank you very much for your time.
1. IRS 4506-T
2. 2 months of recent paystubs
3. Most recent tax return
4. Monthly housing & loan obligations