How to Write a Hardship Letter to Avoid Home Foreclosure
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Writing a hardship letter to your mortgage lender may be the only chance you have to save your home from foreclosure. You must have a valid hardship to qualify for any type of loss mitigation. A hardship letter is a detailed explanation of a hardship in your life that has caused you to fall behind in your financial obligation to your mortgage lender. In your letter, outline the specific details of your reason for default along with supporting documentation. Your hardship must be temporary and you must now be in a position to begin making payments on your mortgage.
Important information you will need to write a letter of hardship include:
Date
Loan Number
Reason for Default – Hardship
Supporting Documentation
Detailed events
Dates of Events
Your proposed outcome – what you would like to happen
Documents supporting end of hardship
Some valid reasons for hardship that will be accepted in a hardship letter include:
Death of Borrower
Death of spouse or family member
Unemployment
Decrease in working hours
Elimination of overtime or second job
Involuntary job relocation
Increase of expenses due to short term unemployment
Mandatory pay reduction
Decline in earnings for self employment
Failure of business
Short term or permanent disability
Increase in expenses due to illness
Divorce
Incarceration
Keep your letter detailed and to the point.
Top Reasons Homeowners Fall into Foreclosure:
Loss of Job/Economic Recession – Many times circumstances are beyond the homeowners control like a job layoff due to downsizing or business closing or a slowdown in the economy.
Predatory Lending – Some lenders will approve buyers for amounts that are greater than they can really afford with high interest rates or with adjustable rate mortgages.
Divorce – Typically, a spouse is awarded the house in the divorce and can’t afford the payments on one income. Divorce rates are high; therefore this has become a common reason for foreclosure.
Medical Illness – Unexpected medical illness can cause great financial hardship but are a necessity. Medical expenses can cause you to fall behind in your mortgage.
Buying a Home Before Sale of Existing Home – Impatient home buyers will sometimes buy a new home before they sell their existing property. Having to pay two mortgages can cause a financial hardship.
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