Often Overlooked Hardship Letter Issue...CRITICAL to Short Sale Success
Paddy brings up an interesting point about hardship letters. I can see how it would be important to have consistency when trying to negotiate a mortgage solution, whether it be a loan modification or a short sale, to ensure that everyone is on the same page and that the reasons are the same. I'm not sure if the person at the bank would catch different hardship letters as they sometimes can't even find the note on a property. Read on and ask yourself if this has been overlooked by your client and/or you.
There has been a lot of discussion regarding hardship letters and their importance in short sale negotiations. However, there is a frequently overlooked aspect of them that is vitally important. The hardship letters will be different in a loan modification than a short sale. You may then ask, “That is true, by why do I care?”
You should care and you need to care – especially if the loan modification was submitted and you do not have a copy of it. The issue is what I refer to as “synchronicity”. If I were a short sale agent, I would want to see the submitted hardship letter before you submit one for the short sale. You are trying to avoid inconsistencies and discrepancies.
The goal of a loan modification hardship letter is to discuss WHY or HOW the home owner was unable to keep up with payments and hen to discuss HOW or WHY they will be able to make payments going forward, if the loan is modified. A typical loan modification hardship letter will stress hope for the economic future. It will detail why payments can be made and the basis for it (salary increase, expense dropping off, etc.).
A short sale hardship letter will probably not have this optimistic economic aspect to it. It is very important to reconcile these inherent differences so that a lender can accurately assess the situation. It is also important for the person negotiating the short sale to see what has been submitted in the loan modification package in order to avoid discrepancies. The information that a short sale negotiator would need to know is the financials that were submitted.
The important thing to remember is that you are negotiating a short sale with the same lender (servicing agent) that also was involved in the loan modification process. Hey will have whatever information was previously submitted and there is a tendency to believe that the lenders and servicing agents are unorganized and may not know what they have. Do you want the success of your short sale to be dependent upon the lender’s lack of organization??
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