Writing a Hardship Letter

If you're struggling to make your mortgage payments and are considering foreclosure alternatives such as a loan modification, short sale, or deed in lieu of foreclosure, you'll likely need to submit a mortgage hardship letter or complete a hardship affidavit as part of your loss mitigation application. These documents explain the financial hardship that has left you unable to afford your home and help your loan servicer determine whether you qualify for mortgage relief.

Understanding what qualifies as a financial hardship for mortgage assistance, what to include in a hardship letter, and how to avoid common mistakes can make a significant difference in getting your application approved. This article covers what counts as a hardship, how to write an effective letter, and when you should consider talking to a foreclosure attorney or HUD-approved housing counselor.

What Is a Financial Hardship for Mortgage Relief?

A "hardship" is a circumstance beyond your control that has resulted in a situation where you can no longer afford to make your current mortgage payments.

Types of Financial Hardships That Qualify for a Loan Modification or Foreclosure Help

Hardships that qualify you for loss mitigation (foreclosure avoidance options) generally include:

• job loss or a reduction in pay
• illness of the homeowner or a family member
• medical expenses
• divorce or separation
• adjustable interest rate reset
• military service, and
• natural disaster.

Remember that the above list of hardships isn't comprehensive; other hardships are also valid. You might have suffered a hardship without even realizing it. For help in determining what hardship you've suffered, talk with your spouse, lawyer, or HUD-approved housing counselor, and reconstruct the series of events that, together, have left you in your current financial situation.

What Is a Hardship Letter or Hardship Affidavit?

A hardship letter or affidavit is part of the loss mitigation application process. It's something you must provide along with pay stubs, tax returns, a financial statement, bank statements, and any other information your loan servicer (the company that handles your loan account for the lender) requests.

What to Include in a Hardship Letter

If you need to write a hardship letter, don't take this requirement lightly. Many people make the mistake of spending very little time thinking about and drafting their hardship letter, or (even worse) they just copy a sample letter off the internet.

Because the loss mitigation representative who will review your file has most likely read literally hundreds of these letters, your letter should be genuine. The best hardship letters don't use a template. Or they use templates only as a starting point, but also include personal, honest information.

How Long Should a Mortgage Hardship Letter Be?

You don't need to write a lengthy sob story, but should be forthright about your situation. A brief hardship letter works best. The letter definitely shouldn't exceed one page. Just state the facts that are relevant to making your case.

What to Say in a Hardship Letter to Your Mortgage Lender

You should briefly describe the facts or events that had a negative financial impact on you in simple, straightforward, and specific terms. Explain to the lender how you got into the situation and why it was out of your control, without providing too much detail.

For example, if you went through a divorce and can't afford the monthly payment on your own, don't mention that your spouse cheated on you or add other juicy details. Just say you got a divorce, and your spouse, who provided income to the household, is no longer contributing to the payments. Adding any extraneous details might just muddy the waters.

Even worse, if you provide too much information, you risk inadvertently sharing something that could negatively affect your application. For example, you shouldn't mention that paying to send your kids to an elite private school after the divorce made it difficult to make the mortgage payments.

Most importantly, don't imply that your situation is your servicer's or lender's fault or tell them that their employees are difficult. Also, don't threaten to walk away from the property if you don't get what you want.

Sample Hardship Letter

[Your Name]

[Your Address]

[City, State, ZIP Code]

[Phone Number]

[Email Address]

[Loan Number]

[Date]

To Whom It May Concern,

Subject: Hardship Letter – Request for Short Sale

I am writing to formally request your consideration for a short sale of my home located at [Property Address]. Due to unforeseen and unavoidable financial circumstances, I'm no longer able to make my mortgage payments, and I believe that a short sale is the most responsible and reasonable solution for my current situation.

The primary reason for my financial hardship is the loss of my job. I was employed at [Former Employer's Name] for [length of time], but due to [brief explanation, such as company downsizing, layoffs, closure], my position was eliminated on [date of job loss]. Despite my ongoing efforts to secure new employment, I have been unable to find a position that provides the necessary income to cover my living expenses and mortgage payments.

Since losing my job, I have used up my savings and have fallen behind on my mortgage payments. I have looked into all other options available to me for keeping my home, but my efforts have been unsuccessful. I now realize that I can no longer afford to keep the property and believe that a short sale is in the best interest of both me and the lender, as it will help avoid foreclosure and minimize further financial losses.

I am committed to cooperating in the short sale process to ensure a smooth and timely transaction. I've enclosed supporting documentation that shows my financial hardship, including my termination notice, bank statements, and other relevant financial information.

Thank you for your time and consideration. I sincerely hope you will approve this short sale.

Sincerely,

[Your Full Name]

Where to Get Free Help Writing a Hardship Letter for Mortgage Relief

A HUD-approved housing counselor can help you with your hardship letter and other parts of the loss mitigation application process (for free).

Hardship Affidavits

If your loss mitigation application requires just a hardship affidavit, that's generally easier. Usually, you'll just have to check the applicable box among a list of hardship options (and, in some cases, provide a brief explanation), such as:

◊ My income has been reduced or lost due to unemployment, underemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings. I have provided details below.

◊ My household financial circumstances have changed due to a death in the family, serious or chronic illness, permanent or short-term disability, increased family responsibilities (adoption or birth of a child, taking care of elderly relatives or other family members). I have provided details below.

◊ My expenses have increased because of high medical and healthcare costs, uninsured losses (such as those due to fires or natural disasters), unexpectedly high utility bills, increased real property taxes. I have provided details below.

◊ My cash reserves are insufficient to maintain the payment on my mortgage loan and cover basic living expenses at the same time. I have provided details below.

◊ My monthly debt payments are excessive, and I am overextended with my creditors. I have provided details below.

Explanation: ________________________________________________________________________________

When to Talk to a Foreclosure Lawyer

If you're facing a foreclosure and have legal questions, consider asking a lawyer for advice. You might also consider talking to a lawyer if you're trying to get a loss mitigation option, but the servicer isn't complying with the law or is treating you unfairly.