mortgage

Writing a hardship letter for a loan mod

Signing a document
Highlights
  • The goal is to write a brief, yet complete, request for a loan mod.
  • Explain why you can no longer afford your full monthly house payment.
  • Describe how you have tried to rectify the situation before asking for a mod.

When you apply for a mortgage modification, one of the key components of the loan mod package is the hardship letter that explains why you're making the request. Learning the proper format and ingredients of a hardship letter is the key to writing an effective, succinct yet complete request.

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Beginning the hardship letter

Before writing the letter, contact the lender's loss mitigation department, which assesses and processes mortgage modification requests. Speak with someone in the loss mitigation department and obtain the correct spelling of his or her name, the address and direct phone number and extension. You'll need this information when addressing the letter.

When addressing the letter, place the lender name on the first line, the name of the department on the second line and the name of the person you are writing to on the third line. The next two lines contain the mailing address. Skip two lines and date the letter. Skip two more lines and write the name of the person. On the regarding line, or the RE: line, include your loan number.

Writing the body of the hardship letter

In the first paragraph, state that you are requesting a loan modification. Explain the financial hardship that prompts you to make the request. Some of the financial hardship reasons for loan mods include:

  • Job loss or decrease in income.
  • Illness.
  • Death of the home's primary earner.
  • An adjustable rate that has increased the payment to an unaffordable level.

For example, "I am writing this letter because I was laid off from my job in August of last year and have been unable to find a job, which has caused us to become delinquent on our mortgage. While we have done everything we can to make ends meet, our financial situation no longer allows us to make our mortgage payment. We request you consider working with us on a loan modification because our priority is to keep our home."

If you want to keep the home, be sure to say so.

In the second paragraph of the letter's body, suggest solutions. Lenders do not grant mortgage modifications easily, so the borrowers who present viable solutions that allow them to keep making payments are more likely to have requests granted. State which terms of the mortgage you want changed.

For example:

  • If the home is worth less than your mortgage balance, request a balance reduction.
  • If the adjustable rate on your mortgage increased too much for you to afford the new payments, ask the lender to reduce the interest rate.
  • Make a request that puts you back in the situation you were in prior to the financial hardship, so that you can continue to pay on your mortgage.

Whether a loan mod is done under the Home Affordable Modification Program or the lender's own set of rules, there usually isn't much leeway in how a lender's offer is formulated. Still, this paragraph can't hurt.

The third paragraph lists the steps you've taken to fix the problem on your own before requesting a loan mod. Mention whether you tried to refinance the mortgage but didn't qualify, briefly describe your job search and cutbacks you've made in the household budget -- whatever is relevant. If you have spoken to a real estate attorney, include the contact information and the advice the attorney gave you.

Wrapping up the hardship letter

Write that you await the lender's response and, include contact information such as your phone number and e-mail address. If the loan is in two people's names, each borrower should sign and date the letter.

By writing a succinct, well-thought and planned hardship letter that includes the information the lender needs to make a decision, you improve your chances of getting your point across and your request approved.

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