What to Include in a Financial Hardship Letter to your Mortgage Lender

Writing a financial hardship letter to your lender can be a difficult process because the emotional impact of the loss of income, or other difficult circumstances, can impair your writing abilities. The overall point of this letter is to inform your lender of the reasons you have fallen behind on your payments and how they can assist you to remedy the situation.

Tell The Facts

When you are explaining why you fell behind in your mortgage, you need to stick to the facts. Rather than trying to have the mortgage lender empathize with your situation, tell them the facts of your situation.  Make the writing clear and easy to understand. If you have fallen behind because of a job loss, be specific about the day you lost your job and the loss of earnings.

Offer the lender a payment schedule that you can afford and paint a clear picture of why you can afford it. Don't forget to include that you require their assistance for your success.

Understand That Lending Is a Business

It is important to understand the situation from the lenders point of view as well. They are a business, and as a business, they must protect their assets. Be sure to allow room for negotiation. 

Prove How You Will Succeed

Proving success is often the hardest part of a hardship letter because of life's uncertainties. Take the time to develop a plan and understand your options. For example, in some cases, lowering an interest rate will help the home owner because it means their mortgage payment will go down. This is a good option for people with higher rates.

Sometimes, rate reductions are not viable options.  If, for example, you already have a low rate, you can ask for a principal reduction. Although this is significantly difficult to accomplish, it can be done.

Also, in some cases, adding the mortgage payments tot he loan is a viable option and can provide great relief. This is a good option for those who have run into financial trouble due to hospital bills, or large sums of money being taken all at once.

The main idea behind the letter is to prove that you will succeed, with their help. Show them you are working diligently to make your payments and do not want to lose your home. Understanding how a loan modification works will allow you to properly convey your plan to your lender.