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Sample Loan Modification Hardship Letter
The loan modification process can be quite intimidating. You have to fill out all kinds of paperwork, negotiate on terms with your lender, as well as write a letter stating hardship. Out of those three main steps, the letter is the most difficult to do on your own. To give you an idea of how your hardship letter should look, here is a sample loan modification hardship letter to give you some guidance:
To Whom It May Concern:
This letter is to formally follow up on my application for loan modification I sent in to you last week. The application states what we had and what we are looking for, but obviously does not go into how exactly we got into the situation we are in now.
There were severe cutbacks at my job in November and I was transferred to a lower paying position in the middle of other people getting laid off. I should be grateful, but the salary I receive in this position is ¾ of what I was previously making. It had gotten to a point where we were pulling from our savings and scraping change to be able to make our mortgage payments and pay the bills. Two months ago our interest rate went up from 7.45% to 10.35% as we have not been able to manage and keep up with our payments since.
I would like to request our interest rate be lowered to anywhere from 7.25% to 8.40%. We feel this is a fair number to both parties. We were always punctual with our payments before my demotion and my wife is due for a raise next month. We are willing to work with you in finding a compromise that we can both agree on.
Sincerely,
Your Name
It’s important to stick to the facts in these letters, and this sample loan modification hardship letter does not veer off from the point: I simply cannot afford the high interest rate in my current situation. Be sure you mention why you are having problems with your payments and make it clear that there is no way for you to be able to manage as you are now.
Also be sure to mention the rate you would like. Your lender doesn’t have time to sift through every application and determine the exact rates they want.
Stating the interest rate you’re looking for gives them even more of a reason to accept you, because you have determined the interest rate you can handle on your own. It also shows that you are worried enough to have done the work to determine your ideal rate. Use this sample loan modification hardship letter as an example and work around it. A good letter can make all the difference.
Example of a Hardship Letter for a Mortgage Loan Modification
A basic loan modification requirement is to demonstrate to your lending institution that you are faced with a financial hardship situation. You need to present enough evidence to convince your lender that, due to your current circumstances, you need to negotiate a lower monthly payment with them.
Some mortgage holders find the process of composing this letter somewhat intimidating. However, bear in mind that lenders are highly motivated right now to approve borrowers under the new Obama guidelines. A hardship letter is your opportunity to let your bank know what has happened since they originated your mortgage, and why you must get a modification on your current terms. Below is a letter that will give you a starting point for composing one of your own.
Date.
Lending institution name and address.
Your name, your address, and your loan number.
Dear [blank]:
This letter is to explain to you, my current financial circumstances, and to request a loan modification from your institution, so that I may stay in my home. My family and I do not want to lose our home, and we are willing to work with you to do whatever it takes to stay here.
We became delinquent on our mortgage payment, due to my husband’s job layoff. He was employed for five years, but then he was out of work for four months. During those four months, we needed to spend our savings to buy groceries and pay our basic bills, to make ends meet, we cut back on our expenses by any means possible. Now however, we have depleted our savings and must use credit cards simply to pay for living expenses, and to keep up with other bills.
The good news is that recently my husband started a new job. While his pay is less than what he earned before, we have adjusted our budget, as necessary. With a modified monthly mortgage payment, we will be able to afford to stay in our home. As you may know, due to declining property values all around, our houses value has declined so much that selling or refinancing is not a possibility. Renegotiating our loan with you is our only option.
In light of our family’s circumstances, please consider as for President Obama’s home affordable plan, or whatever other program we might qualify for through your bank. We are hard-working, responsible homeowners, simply trying to keep our family’s home. Please review our enclosed application, and consider us for a rate reduction to 2%, with 40 year terms. Thank you very much for your consideration, and we are most eagerly awaiting your response.
Respectfully,
[Your name].
Of course, you will need to use this letter as a template. Personalize it as necessary, describing your own particular circumstances. The main points are to be descriptive, yet three, providing a few details to try to gain your lender’s sympathy. Also, you will be required to demonstrate your ability to meet the new modified payment terms of the loan. This means that you’ll need to submit to your lender a budget detailing your expenses and income. Show your lender in black and white terms that you we’ll be able to afford the renegotiated terms of your current agreement with them. A budget that includes a small provision for emergencies each month will lend credibility to your application.
Once you understand how to write an effective loan modification hardship letter, you stand a good chance of qualifying for a home loan modification that allows you to stay in your home. You’ll need to complete a financial statement, so begin by assembling any necessary documentation for this. Wait to contact your lender until you have all your paperwork together. By being thoroughly prepared, you stand the best possible chance of saving your home, under this once-in-a-lifetime plan.