A letter of hardship is used when you need to modify your home loan, a balance reduction, or interest rate reduction due to financial hardship.
A serious change of financial circumstances that lead to your financial hardship can include:
- Death of a spouse
- Reduction in pay
- Job layoff
- Serious medical condition
Be sure to mention in your letter how your current situation occurred and what you have done to try and improve the situation.
Contact Your Bank For Information About Letters Of Hardship
Contact your bank’s loss mitigation department before you submit your letter of hardship to see if they require a letter or an affidavit. Some banks may require an affidavit as they are more formal and legally binding than a letter.
Regardless of what the bank requires, you will need to submit an application with your letter of hardship with your information. If you want to keep your home, be sure to mention that fact.
Be Polite, Direct, & Offer Solutions In Your Letter Of Hardship
When you write your letter of hardship, be polite and direct. Tell the bank your story, no matter how depressing it may be. They need to know the details of your situation before they can make a judgment.
Do not attempt to bargain, lie, imply that a secret account or relatives can get you the money needed, or insult the bank. It is advised not to promise that “things will turn around”. It will not work in your favor and your request for modification will be denied. If you are temporarily experiencing troubles and expect things to turn around soon, it is not advised to submit a letter of hardship
Remember to offer solutions in your letter of hardship, like a loan modification. Banks tend to look favorably on borrowers who present practical solutions to allowing them to continue making payments on their mortgage.
Provide Accurate Financial Proof Of Hardship To Your Bank
Keep accurate records throughout your time as a homeowner so you can give your bank and lender with relevant financial information such as:
- Pay stubs
- Bank statements
- Recent federal and state tax returns
- Loan information
Banks need this information to determine if you are eligible for a modification or other solution during this trying time. If you are deemed qualified, you will be given a trial period to show that you can indeed make the new payments.