Writing Hardship Letters

A hardship letter is a pivotal element when dealing with mortgage default situations. This document is your personal testimony, narrating the circumstances that led to the initial default on your mortgage, the measures you’ve taken to rectify the default, and the assistance you are seeking from your lender to overcome this predicament. Essentially, it’s a comprehensive timeline presenting your past, present, and future financial situation.

Based on guidance from the National Consumer Law Center, there’s no one-size-fits-all template for a hardship letter, and each one will be unique to the borrower’s situation. However, it’s essential to keep the narrative objective and refrain from assigning blame to the servicer, lender, or your employer.

Here’s how you can structure your hardship letter for maximum impact:

• Personal Details: Begin by stating your personal information, including your name, address, and mortgage account number, to establish the context.

• Introduction: In the first paragraph, state the foreclosure prevention solution you’re seeking. This could be reinstatement, special forbearance, or streamline refinance. If you’re uncertain about the appropriate solution, express your general intent to prevent foreclosure.

• PAST: In the following paragraph, dive into the details of your hardship. Describe the reasons leading to the hardship, correlating them with the timeline of your missed payments. Honesty is key here; avoid overstating or understating your crisis.

• PRESENT: Outline your current financial standing in the next paragraph. Discuss your income and expenses, highlighting any potential changes that may occur in the future. If you have any savings that could help rectify the delinquency, mention it here.

• FUTURE: Next, articulate your proposed plan for recovery. Enumerate the reasons why you believe the plan will work, emphasizing your commitment to adhering to it until resolution.

• Conclusion: Wrap up your letter by stating your preferred communication method and times.

• Attachments: Accompany your letter with relevant financial documents, such as a detailed home budget, financial statements listing assets/liabilities, tax returns for the previous two years, current pay stubs, and recent bank statements. If you have listed your home for sale, include a copy of the realtor listing agreement.

Aim to limit your letter to a single page to ensure it’s read in its entirety. A housing counselor can assist you in crafting your hardship letter, but it should be personally signed and dated by you. You can request a Hardship Letter Template here

Apart from writing a powerful hardship letter, here are four additional, in-depth strategies to help prevent mortgage foreclosure:

1. Consistent Communication: Establish and maintain regular, open communication with your lender right from the outset. Most lenders prefer resolving issues to avoid foreclosure, and your proactive communication can be a catalyst in devising alternative solutions.

2. Expert Consultation: Engage with HUD-approved housing counselors, real estate attorneys, or certified financial advisors who specialize in foreclosure prevention. Their expert advice, based on years of experience and a deep understanding of foreclosure laws, can provide the insights and guidance you need.

3. Government Assistance Programs: Familiarize yourself with state and federal assistance programs designed to aid individuals in foreclosure situations. For instance, in Michigan, the Step Forward Michigan program can provide financial aid to eligible residents facing foreclosure due to unavoidable financial hardship.

4. Loan Modification or Refinancing: Consider negotiating a loan modification or refinancing with your lender. These strategies can potentially reduce your monthly payments or your overall debt, making it more manageable and less likely to result in foreclosure.