How to Write the Hardship Letter for a Mortgage Modification
by: Jonathan Goldsmith Cohen
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On a regular basis, I counsel my clients how to write their hardship letters as part of a mortgage modification packet. Here are my tips for how to write the best hardship letter possible. In addition, I will provide thoughts on the mindset you should have going in to write a modification letter and a suggestion for how to structure your letter.
I. Some thoughts About Hardship Letters
The purpose of a hardship letter is to explain in simple, concise language why you fell behind on your mortgage payments and what you propose as a solution to the problem.
Your bank has no heart. Believe it or not, I am empathetic and sympathetic. I practice bankruptcy law to use my powers for good not evil and help people live decent lives. Your mortgage has no feeling about your situation though. A long, emotional letter spelling out horrors and tales of woe is not going to make any difference with your bank.
A hardship letter is not the basis for approval of a loan modification. The determination whether or not a loan mod is granted depends on your financials and governmental programs for loan modifications and your bank’s in-house programs for loan modifications.
The fact that a home has lost considerable value cannot be the sole reason cited in a hardship letter requesting a modification. Banks will not modify a loan if your financials have been consistent but you stopped paying the loan solely because the home is suddenly worth less than the total mortgaged amount.
II. Tips for Writing a Great Hardship Letter:
Tip One: Keep it short. Your lender has no interest in reading a long letter. I cannot stress enough how important it is to be concise.
Tip Two: Less is more when you talk about your hardship. Going into too much detail could end up hurting you if your lender sees factors that would make you a less worthy candidate for a modification.
Tip Three: Write the letter yourself. I always advise clients to write their hardship letter themselves even though I am representing them for a loan modification.
Tip Four: Use simple, clear language. Write like a layperson. Leave the legal language to me. I’m the one who is a practicing lawyer.
III. How your letter should be structured:
- Open with a brief explanation of why you stopped paying your mortgage. Cite a specific hardship. Examples of specific hardships are loss of a job, reduced income, or illness.
- Mention specific steps you have taken to avoid defaulting on your loan. An example could be how you have cut back your household expenses.
- If your financial situation has improved or is certain to improve, it is important to mention that the hardship you experienced was temporary and will not impact upon your ability to make the payments on a modified mortgage.
- State exactly what relief you are requesting from your mortgage company. For example, I always advise clients to ask for a reduced interest rate and any mortgage arrears to be put onto the back end of the loan. Also, ask for late fees to be forgiven. You have nothing to loose by asking for a principal reduction as well, but at the moment, the chances of getting a principal reduction on a first mortgage in New Jersey are slim to none.
I hope that you find this helpful! Contact me with any questions about writing a good, succinct hardship letter.