Composing a hardship letter to present to your lender for a loan modification can be challenging. Not only do you have to prove to your lender that you are a prime candidate for receiving a loan workout because of financial difficulty, but you must also be able to convince them that with a reduced monthly payment, you can still afford to keep up the payments in additional to your other expenses. While you want to include enough detail for them to understand your situation, you want to remain concise and avoid long-windedness. Here are some tips on writing your own letter.
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A successful hardship letter for a loan modification contains 4 basic points. Without effectively explaining your situation in a compelling way, or by leaving any information out, your lender may be unwilling to help grant your loan workout. The following is information regarding 3 of the points you'll need to include in your own letter.
1. The time line surrounding the cause of your late payments. Your lender wants to know that your financial hardship occurred around the same time you were unable to maintain your mortgage payments. By this they can easily see that your lack of finances correlates with your late payments. One example would be if you had surgery in January, and your first late payment was in February, and you were unable to catch up. Not only is it easy to see what the next outcome is, but it is also simple to document. If your variable rate shot up in June, and you were finding it hard to cope with the higher payment, make sure to explain all of this so that it is easy for them to follow along.
2. Unforeseen circumstances beyond your control. Being able to convey why your payments were late due to reasons you couldn't help gives just enough detail for your lender to empathize with the situation, but avoid providing too much background information. You might have been downsized from your job and remained unemployed for several months, but you now are working again for less pay. Here is where you would mention how the sudden unemployment status left you unprepared, what steps you took to finding a new job, and any other pertinent information regarding the measures you took to try and get back on track.
3. Cite your progress and let your lender know you will avoid defaulting again. As many workout loans have been re-defaulting, banks have becoming more and more cautious in wanting to help struggling homeowners. It is important for them to see that you have made long-term budget adjustments to help combat further problems down the road.
Writing and effective hardship letter for loan modification makes all the difference in being approved for help. Although it might not seem too complicated, if you aren't able to prove to your lender that you are worthy of having your loan altered, they can easily turn you down. So make sure you understand what you need to include in your own letter to improve your chances of success.
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