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What to Include in a Loan Modification Hardship Letter – Helpful Advice to Getting Approval
The loan modification hardship letter is often thought of to be the most difficult part of applying for a loan modification. Not only is there a large amount of pressure on the hardship letter itself, but certain information needs to be included while other information should be avoided.
Because of the need to write the loan modification hardship letter, many homeowners get discouraged. But keep the following points in mind and you’ll be writing the perfect letter to send to your lender with ease:
At the start of the letter, be sure to state that you’re writing the letter to supplement your application. This can easily be done by using a sentence like “I am writing/sending this letter to support/explain my application for loan/mortgage modification.”
The hardship letter needs to include any circumstances leading to your current financial hardship. Some examples of circumstances would be: being laid off or demoted, or loss of a cosigner or spouse. Besides these circumstances, there are several that any lender will accept. Lenders understand that life happens and there are just some situations you cannot get out of easily, if at all.
Explain why your current interest rate is unmanageable for you. This is different from circumstances in that you explain what you’ve done to try to accommodate the rate, but can’t find the means to do so. A rising interest rate on the same budget that you’ve had for a long time is also means for a loan modification.
Before writing the letter, come up with a budget or plan that you’re going to use to handle your expenses. Explain the main points of your budget or plan in your hardship letter. This shows that you are going to try to make changes to keep in your home and on your feet.
Including the interest rate you’re looking for in your loan modification hardship letter cannot hurt your chances for approval. And if you’re approved, you may even get that rate. Just be sure that it is reasonable and explain why that rate works for you.
Somewhere near the end of the letter be sure to include your intent to stay in your home and work with your lender. They don’t want you to go into foreclosure, but they do not want to give assistance to someone who is not going to make an effort either.
These are the main points you should include in your loan modification hardship letter to get the best results. A clear, concise, and professional letter will get you that much closer to a modification.
Common Signs of Loan Modification Scams and How to Avoid Them
For those considering loan modification, times have likely been better. Generally, people only seek information on modifying their loans after having some difficulty keeping up with their mortgage payments and other bills. They see this as an option to stay in their homes and continue getting their finances back on track.
Unfortunately, some loan modification companies are preying on these individuals with false promises and guarantees that are too good to be true. Since the Home Affordable Modification Program, or HAMP, began many opportunistic individuals, including some loan modification attorneys, have attempted to profit.
Here are some warning signs that one of these loan modification companies is attempting to add you to their list of victims.
1) They ask for upfront payments. This is one of the most important flags because of its predatory nature, and also because it is illegal to ask for money before their work on the modification has begun. Also, you should never make your monthly payments to the loan modification attorney or any other third party. Your loan is still serviced by the lender and that’s where your payments should be sent.
2) They offer results that are too good. While the purpose of the program is to reduce your monthly payments to an affordable amount, either through spreading out the repayment period, reducing interest rates or reducing the principal, if the offer sounds exceptional then be wary. Any “guarantee” or “promise”, whether it is an end to foreclosure proceedings or even acceptance into the program, should be approached with caution.
3) They can’t, or won’t, explain the services they are going to do. While the loan modification process can sometimes seem difficult or tedious for homeowners, the process is relatively straightforward. Your lender supplies a packet that must be filled out, generally including an authorization to release tax information, proof of income and bank statements, as well as an explanation of why you are having difficulty making the payments. There is no mystery or secret to the process and any reputable loan modification company should be able to explain the process to you.
Loan modifications can be confusing to many people but guard yourself against potential scams by watching out for upfront payments, too-good-to-be-true results, and mysterious methods.