I've worked with numerous homeowners that faced foreclosure. Many wanted my help in negotiating repayment plans with their lenders and others wanted my help with representing them in short sales. For those of you who are currently mulling over which route is best to solve your mortgage problems, let me tell you now that regardless of which route you choose --- both will require a hardship letter.
WHAT IS A HARDSHIP LETTER? It's a letter that describes your personal challenges, usually finacial challenges caused by the loss of a job, a recent divorce, illness or death in the family. The letter describes any unfortunate circumstance that caused you to fall behind in your mortgage payments.
Before you sit down to write this letter, let me offer you a bit of advice. First, take your time and think about what you want to say. It's best to start with a rough draft. Get a blank sheet of paper and jot down your thoughts. Don't worry about your grammar or spelling or if the events that led up to your problem are not in chronological order, you can revise all this later. The key here is to just get your thoughts down on paper before your brain cells go cold.
Now, when it's time to go back and revise your letter, make sure that you've elaborated on your situation properly. Be sure to provide plenty of details. You want the Loss Mitigator assigned to your case to get a very clear picture of what caused your problem. Unfortunately, in my line of work, I've seen too many hardship letters that were either just 1 or 2 paragraphs long and that did a very poor job of describing the homeowner's challenges.
So, what's my next piece of advice? Let me remind you that a human and not a heartless robot will read your letter. The Loss Mitigator that will review your letter is a person too and they can be just as easily moved by a story describing severe challenges as you or I can. So, make sure to open up. Be honest about describing your situation.
Okay, what's next on my list? Keep in mind what you're trying to achieve by writing this letter. What is your objective? Are you trying to get your mortgage company to approve a short sale? If so, then you'll need to mention that you can no longer afford to keep your home and that you would like for your lender to consider your potential buyer's short sale offer.
If selling your home isn't your intent and you want your lender to approve a temporary or permanent repayment plan, then your hardship letter will be different from the one used for a short sale. In this letter, you should write about how you want to keep your home and describe what steps you've already taken to correct your mortgage problems. These steps might include examples such as: you found a higher paying job, or you've taken on a second job, or you've taken in a boarder or tenant in your spare bedroom, or that you sold your old gold jewelry that was worth $8,000, etc. Okay, I think you get the picture.
NOW, LET'S RECAP. When writing a hardship letter, make sure to:
1) Take your time and work from a scrap sheet of paper.
2) Be honest and detailed in describing your situation.
3) Keep your objective or the purpose of your letter at the forefront of your mind. Remember --- are you trying to get a short sale approved or are you trying to work out a repayment plan? It's important to keep in mind which one you are trying to achieve.