At the request of their lender, many homeowners are required to prepare and file a mortgage hardship letter with their lender’s loss mitigation department before receiving hardship-based assistance from a lender. The hardship letter informs a lender about a homeowner’s current financial situation, proposes a lender-approved remedy to their inability to meet mortgage payments, and explains how this proposed solution will work into the future, given their current financial status.
Preparing and Supporting Hardship Requests and Financial Status Explanations
Typically, a lender’s loss mitigation department will have been in contact with a struggling mortgage holder over the phone several times before requesting a hardship letter. During these conversations, or through the suggestion of another party, such as legal counsel, a homeowner may determine a potential remedy to their current mortgage payment struggles may be available from their lender. The homeowner, however, must use the mortgage hardship letter to convey to their lender their need and ability to meet payments proposed under a hardship request.
Alongside any statements concerning hardship, however, a homeowner in distress needs to provide documents, bills, and other supporting statements that verify a given hardship, as well as confirm their current income and expenses. Gather both a proposed plan of remedy to your existing mortgage facing default, as well as all the requisite documentation needed to support financial claims made in your hardship letter, before attempting to write the document itself.
Writing the Document Itself
The hardship letter itself should be prepared in typed-format, with a standard font and formatted into a traditionally accepted business template. The letter itself, excluding supporting documentation, should be no more than a page, and unless requested electronically from your lender, should be sent via certified mail. At the top section of the properly formatted letter, a homeowner should place all appropriate identifying information pertinent to themselves, their loan, and the loss mitigator overseeing their case.
Here is what and where a homeowner should place into the content of their hardship letter:
- In the first paragraphs, acknowledge that a mortgage is in default or is facing default and request some form of hardship relief, whether it be forbearance, modifications, or any other potentially acceptable remedy from your lender
- Provide a brief outline of the reasoning for one’s current hardship in the next paragraph, while referencing quantifiable facts from supporting documents
- Provide a brief overview of the current financial situation of a household, including income and expenses, while documenting any statements made with attached bills, paystubs, or other information
- Explain in both financial terms and in words how a proposed hardship work out will be successful, given one’s current income and expenses, as well as including any other future alterations to income that a homeowner expects, which also must be documented
- In the last paragraph, suggest a consultation or meeting as soon as possible, as well as offer to your lender to provide any other additional documentation or information they desire
- Sign the letter with your signature as well as date
Getting Legal Help with a Mortgage Hardship Letter
Although formatting and style are helpful when creating a hardship letter, the crux of the information that a lender needs to see is that a homeowner is financially fit enough to feasibly meet payment obligations into the future; both short-term under the proposed remedy and long term to justify a hardship work out remedy. This is best explained using documentable income and expense figures, while also referencing personal actions taken to prevent hardship in the first place, such as selling assets or reducing expenses. An attorney can assist with preparing and filing these claims and pieces of evidence in your hardship letter, but more importantly, an attorney can counsel homeowners on what type of foreclosure prevention action may really be in their long-term best interests, which a lender may not be readily upfront about in all cases.
