Writing a Hardship Letter (for a Short Sale)

In today's real estate market, I meet a lot of home owners that are facing a short sale situation.  A short sale occurs when the home seller's mortgage company accepts less than what is owed in the sale of the home.

The beginning of the short sale process is communicating with your mortgage company and letting them know that you are experiencing difficulty in making your monthly mortgage payments.  This is done through a hardship letter.  And as simple as it may seem, it is a very intimidating letter to write.

In a hardship letter, the home owner must tell the mortgage company what circumstances have changed that have made it increasingly difficult, or impossible, to pay the mortgage.  Maybe your interest rate adjusted, and you have had a decrease in pay.  Perhaps you've lost a job, or been through a divorce.  Maybe you are being relocated with the military or with your company.  Communicating what has changed that makes you a short sale candidate is what you are looking to achieve. 

The hardship letter doesn't need to be a novel.  Two or three paragraphs usually suffice.  If you are drawing a blank, think for a minute about what you would tell your best friend about your situation, polish it up and put it on paper. 

What absolutely MUST be a part of your hardship letter is your name (and the names of any co-borrowers), the property address that is securing the mortgage, and the loan number of your mortgage.  Date the letter and date your signature.  And a great addition to a hardship letter is a monthly budget, illustrating the difficulty you are facing.  Here's an example:

March 10, 2009

Countrywide Home Loans

Re:  Loan 123456789

To whom it may concern:

I am wriiting this letter to express my inability to continue making payments on the mortgage secured by my home at 123 Main Street, Hometown, VA, 12345. 

As the economy has declined, my business income has dramatically decreased.  I sell new cars and demand has fallen to a point that I am not sure that I will continue to be employed with my dealership.  My average monthly income has been more than cut in half.

I am including my monthly budget which include utilities, insurance, groceries and a car payment, and the average monthly income I am bringing home.

Rather than lose my home to foreclosure, I would like to pursue a short sale and market the home for sale with a local Realtor.   I know that I will be unable to stay in my home, but would like to take a more agreeable route to minimize the impact to my credit, and minimize your company's total loss.

Sicnerely,

Homeowner Signature    Date

Homeonwer Preprinted Name

Short and sweet does the trick.  Again, including a monthly budget with income and expenses is a great addition. 

You will need to write a hardship letter to your home equity provider as well, if you have an outstanding home equity balance.  Simply change the loan number, mortgage company, and reference the fact that you are working with the first mortgage holder on a short sale.