Mar 08

Hardship Letter Tips for a Successful Loan Modification

Hardship Letter Tips for your Loan Workout

If you are trying to obtain a loan modification or other loan workout plan, then your bank’s guidelines are going to require that you write a hardship letter.

What is a Hardship Letter? Loan Modification Hardship Letter

A hardship letter is required by lenders when negotiating a loan modification or any loan workout. It is a letter you have to write explaining your financial distress and what caused you to fall behind in your mortgage payments.

When writing your hardship letter remember that lenders will not modify your loan because they feel sorry for you, but rather because you have convinced them that you will be able to make future payments under the proposed loan modification. As a result, while you need specify your financial hardship, your letter should concentrate on how you plan to rectify your situation, rather than focusing on the causes of your financial distress and missed payments.

What is an “Acceptable Hardship”?

Make sure that when you write a hardship letter, you provide a specific cause for missing mortgage payments. Below are examples of acceptable hardships according to bank guidelines:

  • Loss of job or reduction in income
  • Death of the homeowner, spouse or family member
  • Illness of homeowner or family member or other medical emergency
  • Divorce or separation
  • Job transfer (voluntary or involuntary)
  • Adjustable rate reset-payment shock
  • Military service
  • Incarceration
  • Increased expenses
  • Unexpected home repairs

Instructions for Writing a Successful Hardship Letter

  1. Include your name, mortgage loan number, and property address at the top so your bank can locate your home loan easily.
  2. Describe your financial hardship and the circumstances that caused you to miss mortgage payments.


    Hardship Letter Example: “In June of 2008, I lost my job. Over the months of July, August, and September I struggled to make my monthly payment, but still succeeded. When the interest rate increased on my adjustable rate loan, in spite of budgeting and cutting down on any unnecessary expenses, I was no longer able to make the mortgage payment…”
  3. Provide your mortgage lender with a specific plan to get back on track and remain in good standing to make  mortgage payments.


    Hardship Letter Example: Request a fixed rate, lower interest rate, or an extension of the mortgage term for lower monthly payments.
  4. Assure the lender that you are a responsible homeowner who needs a second chance and that you are very motivated to save your home.
  5. Be concise – Do not exceed one page.
  6. Thank the lender for their time.
  7. Sign and date the bottom.

Can You Find Hardship Letter Templates Online?

While you can find hardship letter templates online, because of the nature of writing a loan modification hardship letter, you are better off to write it yourself. Make sure that you are clear and concise and explain to your lender your reasons for missed mortgage payments and that you offer a solution to your financial distress. If you include an acceptable hardship, you will most likely be considered for the loan workout plan that you are seeking.

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