Writing a Hardship Letter

A finan­cial hard­ship let­ter explains to your lender why you are in finan­cial dis­tress and your capac­ity to resolve it. There are dif­fer­ent rea­sons for writ­ing a hard­ship let­ter, but the most com­mon these days are for the pur­poses of request­ing a loan mod­i­fi­ca­tion or request­ing a short sale to avoid fore­clo­sure.  In fact, the “hard­ship let­ter” or “hard­ship affi­davit” writ­ten by the home­owner is required in the loan mod­i­fi­ca­tion process, even if have an attor­ney rep­re­sent­ing you. A mort­gage mit­i­ga­tion attor­ney can assist you with writ­ing this let­ter and will sub­mit it along with your other finan­cial doc­u­ments, so that they can present the strongest case to your lender.  

When writ­ing a hard­ship let­ter for a loan mod­i­fi­ca­tion, keep in mind that lenders want to know why you have fallen behind with your mort­gage pay­ments. Your expla­na­tion should be clear, hon­est, and con­tain just the right amount of detail.  Per­haps more impor­tantly, lenders want to know how you will sus­tain your pay­ments going for­ward, if they decide to mod­ify your loan.  Both of these expla­na­tions are cru­cial to con­vinc­ing a lender why it is in their best inter­est to mod­ify your loan.  

Here’s how you can write a hard­ship let­ter that gets your point across and gets you the best loan mod­i­fi­ca­tion results possible.

Keep it concise:

A typ­i­cal lender will spend less than five min­utes read­ing your let­ter. Keep it to a sin­gle page; any longer and they might not take the time to read the entire let­ter.  Elim­i­nate all unnec­es­sary details and keep only those that are rel­e­vant to your case.

Make a straight­for­ward request:

Start by stat­ing the pur­pose of your let­ter (whether it’s a loan mod­i­fi­ca­tion or a short sale), so that the lender knows what to expect and exactly what you are look­ing for. Basi­cally, it should say “I need you to restruc­ture my mort­gage and obtain a lower, fixed inter­est rate,” in a way that com­pels them to find out why. You can use the sub­se­quent para­graphs to explain your case in greater detail.

Explain your hardship(s):

First, make sure your hard­ship actu­ally qual­i­fies as a finan­cial hard­ship. Your goal is to con­vince your bank that you have no other means of mort­gage assis­tance, and that you can get back on track if they do grant your request. Finan­cial hard­ship is typ­i­cally a loss of income or major expenses that were unex­pected or beyond your control. 

Exam­ples of valid hard­ships include: 
Loss or reduc­tion of income (loss of employ­ment, demo­tion, etc.)
Nat­ural dis­as­ters
Ill­ness and Med­ical expenses
Death of a fam­ily mem­ber or co-borrower
Divorce
Sep­a­ra­tion
Other legal expenses
Mil­i­tary Service

This list includes some of the most com­mon exam­ples, but is by no means all inclu­sive. Each lender has its own stan­dards, and the pur­pose of the let­ter is to give them a per­sonal look into your sit­u­a­tion. Once you have estab­lished your hard­ship, pro­vide details that will help strengthen your case. Make sure to tell them how you got into the sit­u­a­tion and why it was out of your con­trol. Also, if you have more than one hard­ship con­tribut­ing to your dif­fi­cul­ties, be sure to include all pos­si­ble hard­ships in your letter.

Restate your request:

End your let­ter by restat­ing your pur­pose, in slightly dif­fer­ent words. Ide­ally, your pre­vi­ous para­graphs will have already explained that it is the only way to pre­vent fore­clo­sure. Make it clear that you intend to get back to your reg­u­lar pay­ments once the loan has been modified.

Humil­ity works:

Ulti­mately, your lender makes the final deci­sion to mod­ify your loan.   One thing you should never do is imply that your sit­u­a­tion is your lender’s fault. Instead of pin­ning the blame on any­one, sim­ply state the facts and leave the judg­ment to your reader.    

Finally, thank them in advance and men­tion that you’re look­ing for­ward to con­tin­u­ing busi­ness with them. Keep the let­ter to one page in length: You should be able to con­vey your mes­sage in no more than one sheet of paper. Any longer than that does not help and may actu­ally hurt your chances.  An effec­tive law firm will have staff mem­bers that can assist you with writ­ing this letter.

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