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Hardship Letter Loan Modification

A hardship letter is a brief note addressed to the mortgage lender or servicer explaining the reasons why the borrower has fallen behind on loan payments.  It is a necessary and central component of every loan modification package submitted to lenders. Click here for a sample hardship letter

Depending on the particular loan modification goals and objectives, this letter can be used to request an interest rate reduction, a waiver of imposed fees, or some other temporary solution to help the borrower get back on track while also avoiding foreclosure.  This is a simple document that explains what financial situation led to the delinquency of the mortgage as well as what the borrower is requesting from the lender in order to get the loan into current status.

Although mortgage lenders are getting more accustomed to receiving these letters from borrowers, attorneys and loan modification companies, it is still important to craft a letter that is brief as well as moving; borrowers should convey to lenders that:

  • they know they are at fault
  • there is a reason for the delinquency
  • they are willing to work toward bringing the loan to current status with the help of the mortgage lender. 

Borrowers should include the reason for the financial issues, but should not compose a ten page appeal detailing every step of the misfortune that led to the financial problems. Brevity is key.  Convey as much information as possible without going into too much detail.  Borrowers need to realize that mortgage lenders must review every hardship letter that arrives at the office, and therefore they simply do not have time to read novellas sent by borrowers.

Start the letter by explaining the reason for the correspondence.  Borrowers don't need a flowery introduction but should instead get straight to the point.  Explain that the letter is a request for a rate modification based on your need for some assistance due to a hardship.  Tell the lender what the hardship is. 

  • Did you recently lose your job?
  • Have you been unable to work due to an illness or the death of a spouse?
  • Did your adjustable rate mortgage recently adjust to a much higher interest rate, making it harder for you to meet your monthly financial obligations?

Whatever the reason, state it in the letter.  Don't lay blame on the lender.  It is far better to remain humble instead of attacking the very organization in a position to help you.

A hardship letter does not magically make your financial problems go away, but it is instead a step in a bigger process.  If you make promises that you will no longer be late after the rate modification then keep your promise.  Don't make false statements that you can't back up with documentation.  For example, if you state that your spouse has died then you never know when the mortgage company might ask for a copy of the death certificate to put in your rate modification file.
The good news is that mortgage lenders want to avoid foreclosure if possible.  It's an expensive process and it would be much more profitable to allow you to keep the home if you become current on your loan.  

Sample Hardship Letter

Name: (Your Name)
Address: (Your Address)
Lender Name: (Your Lender)
Loan #: (your Loan #)

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.

The main reason that caused us to be late is (insert reason here and don’t be too lengthy and long winded) Soon after being late and our income not being nearly enough, we had fallen further and further behind. Now it’s to the point where we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time we have exhausted all of our income and resources so we are turning to you for help.

(The approximate date of hardship and we believe that our situation is Temporary or will be Permanent.)
Our situation has got better because (reason here) and we feel that a loan modification would benefit us both. We would appreciate if you can work with us to lower or delinquent amount owed and or payment so we can keep our home and also afford to make amends with your firm.
We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully,
Borrower’s Signature
Co-Borrower’s Signature


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