How to write a hardship letter for a loan or mortgage modification.
A loan modification is a fantastic way to acquire your budget back on course if you are having difficulties handling your monthly mortgage payments. They are going to request what’s called a hardship letter, when you apply for a loan modification with your mortgage servicer. That is why you cannot manage your mortgage payments, and the letter where you may describe the information on your finances. Having a hardship letter that is nicely written is among the most essential steps in getting your loan modification approved. In this post we’ll clarify additionally supply you with a couple examples and the best way to write one you can use as a template to your own letter. The very first thing you will need to do when preparing the letter would be to compose a chronological list of all the elements that have caused one to fall behind (or may) on your own mortgage payments. Adversities that are eligible include work loss, income decrease, sickness, move, divorce, medical bills, death of a partner, etc. In your letter you’ll also wish to make a note of when each event happened and contain any documentation that you may.
You will have to detail the measures you’re taking to correct your scenario. For instance, if you recently lost your job, you will need to demonstrate how you’re actively trying to find employment or you have a brand new occupation. You may want to supply just as much documentation as possible as a way to show your adversities to support your claims. You might also need to propose payment and an interest rate which is affordable based on your own present finances.
Please remember they’ve many folks like you who want help and your mortgage servicer is most likely quite active. So, you will need to try and keep the amount of your letter to about a couple of pages.
Fore more detailed information about loan and mortgage modifications click here.
How to Prepare a Hardship Letter for a Mortgage Lender
Understanding eligible hardships
Not everything qualifies as a bona fide financial hardship. You must prove that you experienced an adversity that is genuine and that it compromised your ability to pay.
Most lenders give consideration to these hardships, among others:
Job loss or relocation, including a layoff or reduction in force (RIF).
Income reduction, such as loss or a wage decrease of overtime.
An unsuccessful business or one that’s struggling with an economic slowdown.
Divorce or separation.
Newborn child, the increased expense and namely maternity leave. Some lenders even consider adoption an adversity.
Death in your family, particularly if the one who passed away was helping to make the payments.
Payment shock, as in a bump in the interest on an adjustable-rate mortgage.
Sickness or injury that either reduces income or raises both or medical expenses.
An excessive amount of debt accumulated with time.
Betting by one of the wage earners of the family who is now seeking treatment.
Substance or alcohol dependence of the family’s wage earners who is now seeking treatment of one.
Incarceration of one of the wage earners of the household.
Questions your hardship letter should answer
Following are the questions your hardship letter needs to answer:
What occasion or series of events caused the fiscal hardship that’s made your monthly mortgage payments unaffordable?
When did the adversity occur?
Is the hardship temporary or long-term? A temporary adversity could be medical bills not covered by insurance, a harm or short-term sickness, or work layoff. There is an adversity that is permanent more like a death in your family or a divorce or separation.
How badly do you want to keep your home? The lender may not care enough to try and negotiate a loan modification, should you really do not care about keeping the home.
Are you really behind on your house payments? If yes, how many months are you behind? What’s the whole dollar amount of your deficiency?
Can you afford to make a house payment? If yes, how much are you able to afford to pay?
What are you really doing to address the root cause(s) of the hardship (in case you have some control over them) and regain your fiscal ground? This could be anything from budgeting more carefully to liquidating assets or finding an occupation that is new.
The goal of your hardship letter is to convince your lender that you’re not unworthy of a loan modification. It should demonstrate that you meet all the lender’s qualification conditions and convince the lender that you’re dedicated to a long term alternative and competent to follow through.
Reviewing a sample hardship letter
You should keep your hardship letter short — one page is loads. Underline the most important points, like the terms of your current loan, the entire insufficiency amount (if any), the date on which the trouble started, anything you have done to resolve the difficulty, etc.
Here’s an example Hardship letter.
Name: (Your Name)
Address: (Your Address)
Lender Name: (Your Lender)
This interest rate alteration will cause our payment to drastically gain in the sum of $1713 per month along with our present payment of $3978.10 raising the payment to $5897.10 per month. Our present income doesn’t support a growth of the magnitude. As a matter of fact, a monthly increase of the sum will destroy us financially as we will be unable to manage the payment and within a couple of brief months with this correction we’ll absolutely fall into foreclosure.
We ran a counseling session with guy -HOPE and submitted a monthly budget where we just have an excess of $174 after we pay our monthly obligations and all. In accordance with the counsel we’re now using for housing prices which is way above the national average.
So, occasionally my husband makes his base pay and other times he makes more than that with respect to the overtime he works. Nonetheless, overtime is never ensured so we cannot so as to meet our monthly duties rely on the overtime.
Please take some time to review the advice and consider our request.
Thank you in advance for the time and thought in this issue. We’re getting excited about working with Ocwen to solve this scenario.
Sincerely and Respectfully,