Writing a hardship letter for a loan modification is very important but can be difficult. If you are unsure of how to begin I hope to help you now.
The purpose of the hardship letter is to convince your lender that you are a good person to offer a loan modification to because of some temporary financial set-backs. You need to show that you cant make your current monthly payments but with a little bit of help from them you will be able to afford all monthly payments. You need to tell a story, a compelling story about how you have gotten into your current situation and what you have done to right the ship.
Three Important Items a Hardship Letter For a Loan Modification Requires
Hardship letter item #1
You need to show that the financial setback that has forced you to not be able to pay your monthly bills was a temporary setback. This will show that given a little bit of time you will be back in good standing with your lender. For example, if you lost your job or were hospitalized and are now working again and through the medical crisis than you would be an ideal candidate for someone who suffered a “financial hardship” due to unfortunate circumstances.
Letter item #2
Show that the situation was out of your control. The lender wants to see that the situation was not a result of poor financial judgment but was the result of unfortunate circumstances. In the example above you would want to describe how you lost the job due to company filing for bankruptcy and the accident was a not-at-fault car accident.
Letter item #3
You have now showed what hardship you suffered, how it was an unfortunate circumstance and now the most important step – show your lender what you have done to correct the situation. Lenders don’t want to be the only ones giving something up with a loan modification they would like to see that you have taken steps to cut expenses or increase income. In the example above you could say we have gone to basic cable, reduced our food costs by 25% and I have since been re-hired making 15% more than I did at my previous job. Make sure whatever you put in your hardship letter is truthful.
Writing a hardship letter for a loan modification is the most important step in the loan modification approval process. It may seem like its only one small letter but if you are not convincing your application could be denied.
Remember…
State your hardship > Show how it was out of your control > Describe the steps you have taken to right the ship
