The goal of the hardship letter is to have the seller explain their situation to the bank. The hardship letter should communicate three key points.
"I'm sorry"
"Here are my circumstances (such as job loss, medical issues, divorce, health issues, damage to the property not covered by insurance, etc...)"
"I have exhausted all of my options and the only next step is letting the property go to foreclosure."
In order to make the most impact with your financial hardship letter, you will need to write it yourself, but there are rules to follow to ensure the greatest level of success and impact with the lender. Following these rules increases the chance of approval and every lender requires a hardship letter.
Tell the truth: The lender will find out the facts so it is important to make sure to outline what happened.
Paint a bleak picture: Make sure it is clear in the letter that there is no way that you will be able to become current, or you would have.
Clearly state financial condition: There are some very serious reasons why you aren't able to make your payments. Some of the reasons that are more valid than others are as follows and should be used:
Job Loss: State if one borrower who was originally on the loan has lost their job and been unable to find replacement work.
Health Reasons: State if there has been medical bills or other debt that has forced the home owner to stop making payments.
Loss of Overtime: If you were originally getting overtime but can no longer get the required hours, state that.
Any large event: If there was some sort of disaster or other major life event state that so that the lender can take that into consideration.
Show the human side: Make sure that you state in your letter how you never wanted to be in this situation and wish that things could change and that this is not what you had ever wanted to do.
See below for a sample Hardship Letter to use as a guideline.
=====================
(Date)
Loan #:
Dear (Lender Name) Representative:
Per your request, I am writing this letter to explain the circumstances that led to me falling behind in my mortgage payments. I never thought that I would be asking for help because I couldn't make the payments on my primary residence.
There were not one, but several factors that led to my inability to be able to pay my mortgage on time.
First, while I signed the paperwork, I was unaware that the original loan that I signed would start adjusting after only having the home for six months. This was the home that my family wanted to be in for the rest of our lives. We were shocked when the payment started to adjust.
We tried to refinance the property but values in our neighborhood declined to the point where no lender was able to refinance our loan to a payment that was less than we were currently paying.
My wife took a second job and I worked overtime to pay for the new change in payments. My wife eventually lost the second job and lost her original job as well. After exhausting all of our credit cards and savings, we were unable to make payments and began to fall behind.
My wife continues to look for work, but has been unable to find a job and we are unable to make our payments anymore. We feel that our best choice is a short sale and appreciate your understanding in this very trying time.
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