Here’s help for writing a hardship letter – needs to be edited

How to Write a Hardship Letter to Your Lender

By Renee Gerke, GML, GRL, CRMS
Sterling Home Mortgage LLC

Phoenix, AZ – In trying to stay in your home loan in today’s market, you may find the need to ask for a loan modification, work out plan, short sale or other type of forbearance from the lender. These requests should be submitted in a “hardship letter” addressed to the loss mitigation department of your loan servicer.

Your goal is to convince the servicer that what you are asking for is necessary, given your financial situation, and that the modification is going to work. This is not the time to explain your “unfortunate circumstances”. Every letter the loss mitigation specialist sees from borrowers is about “unfortunate circumstances”. Servicers do not modify loans because they feel sorry for you, instead they modify loans because you have convinced them you will be able to make the payments.

The writing of a hardship letter should act like an outline or biography of your current life issues which affect your ability to meet financial obligations. Try to objectively describe the hardship that caused the situation. Do not go into a lengthy explanation. Typically, the type of hardships considered are situations such as:
• illness
• loss of a job
• reduced income
• a failed business
• job relocation
• Adjustable Rate Mortgage (ARM) reset
• death of a spouse or co-borrower
• death in the immediate family
• incarceration
• divorce or marital separation
• military duty
• medical bills
• natural disaster

It is certainly OK to mention unexpected expenses that have arisen lately–like medical bills–but I would caution anyone about claiming that it “destroyed your credit rating”. The servicer will immediately pull your credit report, and can then determine whether your problems are recent or ongoing. If you can supply medical bills (or cancelled checks), showing these expenses were incurred just before delinquencies began appearing on your credit report, you may indeed help the servicer see that the issue here is unforeseen expenses. However, you need to be honest with yourself; if your credit history was a mess before those expenses popped up, you don’t help your case by writing something like this. Keep in mind you are composing the letter for your lender or servicer and because of the current foreclosure crisis, they are extremely busy and backlogged. Keep your letter short and concise- usually 1 page, 2 pages maximum.

Give the lenders the information they need to help you. Start out your letter by addressing head-on what payment you need in order for this to work. Submit a budget and a proposal. The letter needs to state your current income and expenses per month. This is not the time to exaggerate your expenses or income. You could be asked for income documentation. Remember they can look at your credit and know exactly what your monthly debt load is and evaluate overall credit worthiness.

Be realistic. Suggesting that you would take in a boarder or get a second job if you got the modification won’t help much if you need the income to qualify for the modified payment.

If you cannot write a proposal because you cannot come up with a set of numbers that work (and can be verified), you really have no business asking for a modification. If you can come up with reasonable numbers that work, it only helps your case with the servicer to come across as someone who has taken a clear view of the monthly budget and can suggest a concrete plan.

Finally, if you are going to email or fax a letter like this, you need to offer to provide whatever documentation the servicer needs in a follow-up letter. A simple way to do this: “Please let me know what financial documents you will need from me, and where to address them so that they come to the attention of the right person”. Quite honestly, the offer to work cooperatively and promptly with the servicer is to your advantage. If you don’t want the loss mitigation specialist to “fill in the blanks” from experience (sometimes cynical) with other letters of this type, don’t leave those information blanks in it. Remember, this letter is only one piece of the loan workout process, but it plays a key role in helping you restructure your payments.

Renee Gerke is a Senior Lending Officer affiliated with Sterling Home Mortgage LLC, a Licensed Broker in the State of Arizona MB0906813. If you would like to obtain additional information, please contact Renee at 480-231-2089.