The most vital part of your packet requesting any kind of loan modification is the financial hardship letter. The financial institution will want this letter from you before starting the approval process on your loan modification. The hardship letter is a detailed accounting of the events that led up to you not being able to keep up with your monthly payments. This will also aid in stopping the foreclosure process, if they have started it, while you are going through the process of trying to get a loan modification.
The letter is mainly a short biography of the events that led to your financial problems. It is a detailed accounting, that states if you lost your job or suffered some other financial issue. You must give them enough details to know your situation, but don’t drag it out. They are not after your whole life history. You will also be telling the loan mitigator what you are capable of doing to aid in fixing the problem.
The easiest way to write this letter is by following a detailed outline of the letter, like the example hardship letter below. This can be very helpful, since most of us would not really know where to start and how to format it. This will give you an idea of how to put your letter in order. The loss mitigators can be very busy, so you must keep your letter brief and on point, but not going into enough detail to completely explain your situation is not good. You must give them enough information that they know how to respond.
Financial Hardship Letter
Type of Letter: Loan Modification
1st/2nd/Heloc: 1st and 2nd mortgage
Type of Hardship: Caring for family member, unexpected expenses, medical disability
Property Category: Primary Residence
Lender: Mor Equity
Loss Mitigation Department
Mor Equity
PO Box 3788
Evansville, IN 47736-3788
To Whom It May Concern:
Re: Request for Loan Modification for property at _________________________.
Loan Number: ____________.
We are writing because we’re facing a serious financial crisis, and hope to work out a loan modification plan that will help us to avert foreclosure. We have owned this home for years and we very much want to work with you to avoid foreclosure.
Hardship:
For the past years, we have been caring for our adult daughter who has been diagnosed with severe __________. All of the financial burden of her care have fallen on our shoulders. We have had to pay for her move to _______, from _______, so we could care for her full-time after she lost her job and was in need of medical treatment. In addition, we are still paying for her food, shelter, transportation, and auto insurance, as well as medical treatment, including doctor’s visits and medication, while she is trying to get back on her feet and get a steady job.
There were a few incidents in caring for her that set us back quite a bit financially in addition to the aforementioned burdens. She was involved in an accident on her way to work one day and we had to take on the financial responsibility of paying for the repair quote and also a new car when we discovered that her old one was actually totaled. In addition, she was involved in another car accident, this time in our car. We also had to replace this vehicle, as it was damaged beyond repair.
Other unfortunate circumstances have arisen that have been both emotionally and financially taxing, as well. On _____, my husband was injured on the job (_________) when his flight hit severe turbulence. He suffered serious nerve injuries to his back and neck that were excruciatingly painful, and also required intensive treatments to assist in his recovery. Because of this injury, my husband was out of work for nearly ______, and his salary was cut in half. This was a tremendous financial shock as he is the primary source of income for our household. While I used to be able to supplement extra income at my job, the company is currently undergoing a restructuring process, and there are simply no overtime hours to be had.
All of these events have culminated in the complete exhaustion of our savings, and we really have no safety nets left. Our current debt-to-income ratio is __%, which puts us in unambiguously dire straights.
Status of payments/ Ability to pay going forward:
We haven’t missed payments on either of our loans, but we won’t be able to afford the current rates in the future. Our funds have been completely drained and we are really struggling.
Request:
Because of the severe and unavoidable financial strain we’re under, we are requesting that you work with us to lower our payments to $____ a month for our combined loans. We have come to this payment amount after carefully reviewing our budget. After a much-needed reduction to our mortgage payments, we’ll have the ability to consistently afford our home loans.
Thank you very much for your time.
Sincerely,
Enclosures:
1. IRS 4506-T
2. 2 months of recent paystubs
3. Most recent tax return
4. Monthly housing & loan obligations
