Whether at the request of their lender or on their own accord, homeowners facing default or currently in default that wish to prevent foreclosure with the help of their lender will file a formal hardship letter to stop foreclosure. The hardship letter includes case-specific information and requests from homeowners regarding their current mortgage or deed of trust agreement, specifically requests to make payments more manageable and stop foreclosure. The following list outlines the appropriate steps for homeowners to take before and when crafting a hardship letter, including:
- Consult with your lender’s loss mitigation department about potential foreclosure prevention options, and confirm their willingness to consider a hardship letter, if sent
- Consider the potential remedy or foreclosure prevention action you are requesting your lender to take. This step is crucial, as homeowners need to comprehend what foreclosure prevention action will allow them to make future home loan payment obligations
- Evaluate and document your current financial situation. This will include gathering documents and figures relating to your current income, current expenses, assets held, other debt obligations, the equity present in a home, and the status of an existing home loan debt, as well as a current market value of your home
- Consider the best method to detail your existing financial hardships, which should include the ability to document the hardship, such as lost income, unexpected increase in expenses, or otherwise
- Research how to and prepare your hardship letter, which should include the following formatting: typed in business format, sent via certified mail to your lender, and include all requisite documentation
- Per business formatting, include all your own pertinent contact information, as well as other identifying information relevant to you and your lender agreement
- Write the content of the first paragraphs of your hardship letter, which should include an acknowledgment of the need for foreclosure prevention assistance, an explanation of current hardships, documents supporting the hardship claim, and a request for a given foreclosure prevention action
- Write the second set of paragraphs of your hardship letter, which should outline how a proposed lender-approved foreclosure prevention action, such as forbearance or modification, will allow a homeowner to meet future payment obligations in the long term. This section should include information on current income and expenses, as well as documentation supporting any expected changes in these areas, if applicable
- Suggest future contact with your lender and lender’s loss mitigation department about the proposed hardship actions, as well as offer to provide any more information at their request
- Keep copies of all information and the hardship letter sent to your lender for your own records
Getting Legal Help with a Hardship Letter
Having an attorney’s counsel before preparing a hardship letter is important. Dedicated legal counsel retained by homeowners to prevent foreclosure on their home can ensure they are requesting the best possible remedy to their existing home loan in default, while ensuring this request is also in the long-term best interest, which lender’s may not be upfront and honest about always. An attorney with experience in foreclosure prevention cases may also be able to direct homeowners to other foreclosure prevention tactics and resources, including federal and state relief programs, which a lender is not capable of or is unwilling to offer on their own. Additionally, an attorney can write and file a hardship letter for homeowners, as well as participate in any ensuing negotiations over requested actions from lenders.
