How to write a hardship letter for a loan modification:
When applying for a loan modification, one of the main requirements will be a financial hardship letter.
This letter serves as an explanation to the lender as to why the borrower can no longer afford to maintain the monthly payments. It also covers what the homeowner has done to try and solve the problem prior to asking for the modification.
In the past few years, the number of acceptable reasons to claim a financial hardship have declined so we felt it was important to take a few minutes to go over the ones that are still available.
Eight reasons that are still considered a hardship in Florida for 2014:
- Loss of Job (now has new job)
- Reduced of Income
- Job Relocation
- Death of Spouse or co-Borrower
- Divorce (spouse has been refinanced off note)
- Military Duty
- Long Term or Permanent Disability
- Damage to Property (natural disaster or unnatural)
For more information on hardships and the supporting documentation that is used to verify them, we discuss hardship reasons in greater detail on our Conditions that qualify as a Hardship for Loan Modifications page.
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Beginning preparations for the hardship letter:
While you can certainly begin preparing the hardship letter yourself, it is strongly advised that you consult with a foreclosure defense and loan modification attorney prior to communicating with the bank or lender. This is the only way to ensure your rights are being protected and that there are no procedural errors which could be detrimental to your case.
Who does the hardship letter get addressed to?
Before you begin, you'll need to learn who to address the hardship letter to. In most cases, it will go to representatives within the lender's loss mitigation department. Loss mitigation associates are the ones who are typically responsible for reviewing and processing any loan modification requests within the lending institution.
An attorney can help ensure the letter is addressed properly and formatted correctly.
Again, your attorney can make this process much easier for you. Here at Fernandez Law Group, we already have most of that information for every lender already on file. Our experience gives us an advantage in knowing how to prepare the hardship letter as per the requirements of each lender.
Too many loan modifications get rejected for simple mistakes and procedural errors, so again, if you are preparing the letter yourself, you should have a trusted attorney review it for you.
Preparing the main information contained within the hardship letter:
The first part of the letter is where you make a formal request in writing for a loan modification, where you will also include the hardship reason. It really only needs to be about a paragraph long, and you should explain the following:
- You are writing because of a hardship
- The hardship has caused you to fall behind on your payments
- You are unable to resolve the hardship and have exhausted your options
- Your hardship is not allowing you to make your monthly payment in full on time
If you are unsure whether or not you qualify for a hardship, refer to the section above titled Eight (8) Hardship Reasons still accepted in Florida for 2014
Do you wish to stay in the home?
If you wish to stay in the home, you are going to need to let them know. So also be sure to request that the lender considers working with you in helping you obtain a loan modification, as your desire is to stay in the home.
You're also going to need to provide some suggestions as to how they can help you resolve the delinquency and resume regular payments to stay in the home. Without question, it can be difficult to have a loan modification granted. The lender is going to be looking for viable solutions from you, and if your solution includes the desire to continue making payments, your chances for approval will be much greater.
There are also a few other factors that come into play when you provide your possible solutions.
Is your home underwater?
When the housing market crashed, many homeowners ended up in situations where their homes were worth far less than what they owed. If your home is worth less than what you owe, a reasonable request could be made upon the lender to see if they would be willing to do a balance reduction.
Did your adjustable rate mortgage make the payments too high?
In many cases, borrowers who received adjustable rates on their mortgage ended up in situations where the interest rate hike made their monthly payments too much to handle. If this happened to you, then you should ask the lender to reduce the interest rate as a possible solution to help you maintain payments and stay in the home.
How to close out the hardship letter:
Closing the letter is going to consist of just a few more quick items - steps you've taken to try and get out of your hardship and then ending with your contact information and that you are awaiting their response.
Steps you've taken to try and get out of the hardship:
This should include changes you've made on your end to try and stay on track with your payments. Eating at home instead of out and packing lunches to work is a bit on the extreme end of things but certainly won't hurt if you're trying to stay in your home. There are plenty of other ways to eliminate added expenses. Shopping wisely, reducing utility payments, and cutting back on memberships to gyms or spas can all help as well.
The lender is going to want to hear that the homeowner has taken steps towards better financial planning and living within their means. It will be important for the borrower to demonstrate that they aren't requesting the help of the lender without putting forth a strong effort on their own end to manage whatever available finances they have.
End with contact info and request for a reply.
The letter should include the name, address, phone number and email address of the borrower, who will also need to sign and date the letter. And if the loan is in the name of two people, then each borrower should sign and date the letter.
Anyone can improve their chances of getting a loan modification if they lay your letter out properly using the general outline we've provided as a guideline, however, you should still consult with an attorney anytime you are attempting to do any important business.
A loan modification is a serious undertaking and they can be difficult to complete. Not only that, but there are too many factors that can lead to lenders denying requests and being difficult to even communicate with.
The Tampa attorneys at Fernandez Law Group have been helping Florida homeowners get the loan modifications they've needed for years. Let us put our experience in foreclosure defense to work for you today.
The consultation is FREE and you can call us today at 813-489-322 to schedule a review of your particular situation.
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Content authored by Gaston Fernandez
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