The hardship letter

In the case of short sales or loan modifications, a letter must be written to the lender describing the circumstances (hardship) causing the borrower’s inability to continue paying the mortgage loan according to the original terms.  A hardship letter should illustrate long-term or permanent circumstances that make the borrower unable to pay in order to be considered a legitimate hardship.

A legitimate hardship is when the borrower’s personal situation has experienced a change which prevents the borrower from making payments as originally agreed.  Some examples of common hardships:

  • Death of an income earner in the family
  • Divorce
  • Large loss of income (long-term or permanent)
  • Job relocation or job loss
  • Mortgage payment adjustment that makes the payments unmanageable
  • Health issues

The hardship must be a long-term situation.  If the owner simply had a bad month or still has money in savings and retirement accounts, the bank is less likely to approve a short sale.

As the housing crisis continues, lenders are becoming more flexible with some of their hardship requirements.  With the current stimulus bill, there may be a way for the lenders to minimize their losses in a short sale.  Hypothetically, that would encourage more homeowners to get out of their houses with relatively little damage to their credit.

For a copy of a sample hardship letter, email info@mangledmortgage.com.

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