In Utah, as with every other state, lenders are looking to see certain elements in every hardship letter before approval. The two most critical elements a homeowner must convey are viable hardship per the lender’s standards and a proposed workout that will benefit both the lender and homeowner. The following outlines the steps to prepare a favorable hardship letter for lenders based in Utah.
Start Communications with Your Lender Early
A lender will not agree to accept a hardship letter from a homeowner without the homeowner first contacting a lender or responding to notices from the lender’s loss mitigation department. In order to even gain lender approval to review a hardship claim, homeowners must communicate with their lender immediately following default, or preferably, before delinquency occurs.
Format the Hardship Letter
Hardship letters are formal business documents, and as such, should be formatted in a traditional business style. Many homeowners will type the document, while ensuring the proper headings include the contact information of the intended recipient and identifying information relevant to a given home loan agreement. Most homeowners also choose to send hardship letters via certified mail, which is advisable.
Prepare and Document Hardship Claims
In the initial paragraphs of the short hardship letter, a homeowner should acknowledge and define their current home loan struggles. Defining these struggles requires homeowners to provide documentation and reasoning for their inability to pay home loan obligations, which should rely on hardship. Hardship claims, which vary in every hardship letter, are most viable when they resultant from unexpected and uncontrollable losses in income or increases expenses. Commonly used examples include unemployment, failure of business, divorce, death of co-borrower, illness, resetting of variable rate mortgage, or other increases in expenditures. Documenting these claims will require homeowners not only provide verification that a given hardship has occurred, but also, they must document from a financial perspective how this has affected their ability to meet mortgage or deed of trust obligations.
Research and Request Potential Hardship Remedies
Once a homeowner has concisely outlined the nature of their hardship and the financial impact of the hardship, they must request from their lender a potential workout or remedy to the situation. Depending on the specific needs and financial situations facing a given homeowner, hardship remedies may include forbearance, loan modification, short refinancing, reduction in principal balance, forgiveness of default fees, deed in lieu, short sale, or some other case specific workout. The essence of whether a given remedy proposed will be approved by a lender lies in the ability of a homeowner to demonstrate their ability to fulfill obligations following a proposed workout, while at the same time, providing lenders with enough financial reason to forgo foreclosure proceedings in lieu of more lucrative alternatives for the lender.
Document Proposed Action, if Workout Is Approved
In order for a lender to determine if a proposed workout is financially feasible for both parties, the homeowner must document and detail how they will be able to meet payment obligations or other requirements, if a given workout is approved. It is up to the lender to decide if a given proposed workout is more financially beneficial than foreclosing a given property. Common items included in this paragraph, which should be the third paragraph of the letter, include income statements, expense statements, proposed adjustments to income and expenses, other assets, and other debts held by a homeowner. In addition, a homeowner may wish to include reference and documentation to other actions they have taken to prevent default and foreclosure before relying on lender assistance.
Getting Legal Help with Hardship Letters in Utah
Realistically, only a lawyer with foreclosure prevention experience can advise homeowners in an unbiased manner concerning their foreclosure prevention needs. Typically, a mortgage in default is the result of a combination of hardships and debt obligations faced by the homeowner, which may be better resolved outside of lender programs. In other cases, proposing the right remedy to a given mortgage in default will benefit from an attorney’s perspective on the best alternatives to foreclosure for homeowners. Additionally, an attorney can file and prepare hardship letters for homeowners, as well as engage in the ensuing negotiations following the submission of a hardship letter.
