Homeowners trying to deal with foreclosure and find an alternative to obtain a lower, affordable mortgage payment will need to write a hardship letter to their lender. This is a brief explanation of your current financial situation, what has transpired to make the payment unaffordable and your intentions to try to maintain home ownership.
Critical Elements to a Hardship Letter
- Make it short and to the point-lenders get hundreds of these everyday and they have heard every story imaginable. All you need to do is explain briefly why you are facing a financial hardship.
- Use certain trigger phrases that are in the government guidelines and let the lender know that you fit into the stimulus program-one such phrase is “imminent risk of default:.
- Make sure that you put your loan number on the top of the letter, the property address and that all borrowers sign it at the bottom of the page.
A hardship letter to avoid foreclosure is just one part of an application package. Other loan modification forms will be required in order to determine if you qualify for some type of loan workout. You will be asked to give a detailed accounting of your monthly income and monthly expenses-this is called a financial statement.
You will also be asked to provide income and asset documentation. This is a full disclosure process and the bank will not just take your word for it. Your paycheck stubs, W2’s, bank statements and any other type of income you receive must be provided to the bank. All of this information will be reviewed and run through a standard mathematical formula that determines if you qualify or not. You can use this very same formula to help you fine tune your own acceptable financial statement-take advantage of a software program that actually does all the calculations for you automatically. Avoid mistakes and make any necessary adjustments to your application before your lender has the chance to turn you down.
