As part of your loan modification application you will be asked to include a “Hardship Letter.” This is a letter directed at your servicer explaining why your monthly mortgage payments have become unmanageable and delinquent.

This is not the time to complain or threaten your mortgage servicer no matter how tempting it is! This will only land you in deeper water. You must be polite and appeal to them on an emotional level. Think of the families on Extreme Home Makeover who always have a sad “hard luck” story to share with viewers. That show always makes me cry.

If you can replicate that type of emotion in your hardship letter (while being genuine and honest) you’ll improve your odds for acceptance. Keep in mind that the person reading your letter is probably an underpaid loss mitigation employee. For those reasons, you want to keep your letter brief and to the point. I recommend one page and an absolute maximum of two.

Identify the reason(s) why you failed to keep current with your monthly mortgage payment and include the dates that coincided with the delinquent payments.

GOOD EXAMPLES of the reason for financial difficulty can include:

* Unemployment, Loss of Job, Drastic cut in hours/Reduced Income
* Medical conditions or complications that prevented you from working
* Illness (Yourself/Family Member)
* Medical Bills
* Loss of income due to the need to become a caregiver to an ill or elderly loved one
* Death of spouse or family member
* Business Failure
* Job Relocation
* Military Service
* Damage to Property (Natural Disaster)
* Single Parent

OTHER EXAMPLES of the reason for financial difficulty could include:

* Payment Increases
* Unanticipated/Unexpected ARM Increase (This is gaining acceptance as a reason)

REASONS TO AVOID USING:

* Legal issues
* Divorce/Separation
* You are a student
* Too much debt/overextended

Oftentimes you may have a combination of reasons for falling behind and it’s fine to include more than one. Be brief but specific.

Include dates and amounts. If applicable, include letters, statements, tax returns, bank statements, late notices, medical bills, or anything that will verify your “hardship.”

It’s equally important to document the “WHY” and “HOW” of how you expect to meet the modified payments if approved. It’s important to state specifically why a reduced payment at a specific interest rate would be affordable to you. Perhaps you are taking on a roommate to increase your income, perhaps your spouse has taken on part-time work, perhaps your hours have increased at work.

Many homeowners have fallen into a trap where they can’t make the modification payments even. The lender doesn’t want to go to through the exercise of a modification if they feel it will be futile and you will begin to default again in six months.

You want to come across as CONFIDENT and feel the lender with confidence that the reason you fell behind was very temporary and that with a reduced payment you’ll be able to meet your financial obligations with no issue. You are back on track and with their help you can continue to have a mutually beneficial relationship.

Yes…you totally have to play the game here. We all know that there are more crooks on Wall Street than in prison but you really want to avoid taking a victim type of approach to your hardship letter.

It’s a fine line.

By coming across as confident you give the impression that you are the type of person who had a hardship (invoke an emotional response) but is overcoming it and taking control of the financial situation. The bank knows if you declare bankruptcy then things get more difficult for them and they are forced into a corner of compliance.

It’s kind of one of those, “deal with them now or deal with them later” versus a homeowner who may come across as more passive. The lenders like the passive ones! They take their homes.

Be sure to state your willingness to participate in a Workout Solution (simply means “Working It Out” with your lender) and your sincerest desire to retain ownership of your home and property.

Be honest, thank them for their time and consideration and be sure to include your current contact information.

For more samples and tips on writing hardship letters (including an excellent tip from a Loan Modification Agent!) please visit my website at http://www.stoporstallforeclosure.com

Maryann Johnson is a wife, mother and former executive who saved her home after two years of fighting with her lender and not making payments. She co-wrote, The Simple Guide to Saving Your Home in order to help other distressed borrowers do what she did and save their homes too! Her website is http://www.stoporstallforeclosure.com

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