If you are applying for a loan modification, short sale, or deed in lieu of foreclosure to avoid foreclosure, one of the requirements is usually to write a hardship letter.

Read on to find out what a hardship is, what to include in a hardship letter, and how to get help if you need help writing one.

What is a “hardship”?

A hardship is a circumstance beyond your control that has led to a situation where you can no longer pay your current mortgage payments. Difficulties needed to mitigate losses (options to avoid foreclosure) include:

• job loss or pay cut
• illness of the owner or family member
• medical expenses
• divorce or separation
• zero interest rate adjustment
• military service
• natural disaster.

Note that the above list of difficulties is not exhaustive; other difficulties also apply. You may have experienced discomfort without even realizing it. To help you determine the difficulties you have experienced, talk to your spouse, business partner, lawyer, or accountant and prepare a series of events that, as a whole, have left you in your current financial situation.

What is a hardship letter?

A letter of hardship or affidavit (see below) is part of the loss mitigation application process and is something you must provide along with payment slips, tax returns, a financial statement, bank statements, and any other information from your lender. The company that manages your loan account for the lender). (For more information on loss mitigation applications, see the steps to change your home loan.)

What is a hardship affidavit?

In some cases, you will need to complete a hardship affidavit instead of writing a letter. But even if you only need to fill out an affidavit, you will probably have to provide a short written explanation of your difficulties.

What should be included in a table of difficulties?

Many people make the mistake of not spending enough time thinking and writing their hardship letter, or worse, simply copying a sample letter from the Internet. Since the loss mitigation representative who will review your file has likely read hundreds of these letters literally, it is essential that your letter is authentic. The best difficulty cards don’t use a template or just use templates as a starting point, they also contain honest personal information. You don’t have to write a long sob story, but you do need to be honest about your case. A short difficulty card works best. Certainly, the letter should not be more than one page long. You only need to indicate the facts that are relevant to your case.

You should briefly describe the events or events that have had a negative economic impact on you in simple, direct, and specific terms. That is, explain to the lender how you got into the situation and why it was out of your control, without too much detail. For example, if you’re divorced and can’t afford the monthly payment on your own, don’t mention that your spouse cheated on you or added other succulent details. Simply state that you are divorced and that your spouse, who has provided income to the family, is no longer contributing to the payments. Adding weird details could obscure things. Worse, if you provide too much information, you run the risk of accidentally sharing something that could adversely affect your application. For example, you should not mention that paying to send your children to an elite private school after divorce also makes it difficult to pay the mortgage.

Petition for serious illness

A serious illness, whether yours or that of a family member, can surely cause financial hardship. If your mortgage is overdue due to a serious illness, the following letter can be a good starting point for creating your financial hardship application.

SAMPLE

Insert Your Name Here
Insert Your Address Here
City, State, Zip

Insert Date
Addressee Name
Company Name
Street Address
City, State Zip

Insert Greeting (Mr./Ms./Miss/Mrs.) Last Name:

I am writing to explain the cause of my home loan default and to request that approval of the loan modification be considered in light of the circumstances that led to this issue. It’s my mortgage number (insert number here). As stated in my account record, my account is at your current institution from the beginning of my mortgage term through (insert number of months). At that time, you were diagnosed (please specify “I”, “my spouse”, or “my baby”) (insert type of serious medical condition).

Due to this serious health problem (enter “I” or “my spouse”) they were unable to work for a period of time. This resulted in a significant loss of income which, in addition to the costs of diagnosis and treatment, allowed me to default on my mortgage. That is why I am asking (insert name of financial institution) to consider loan modification for my account. A reduced payment will allow me to return my account to its current state and avoid further payment problems while I take care of this serious health problem for several months.

Without this unexpected medical situation, my account would never have been left behind. I undertake to do everything in my power to bring my account back to its current state and to be able to stay at home while fulfilling my obligations to your business. Let me know how to proceed as we work to achieve acceptable and beneficial conditions for all parties involved. I really appreciate your time and consideration and look forward to hearing from you soon. You can contact me at (insert phone number), at the address at the top of this letter, or by email at (insert email address).

Regards,

Insert Your Name

The government’s Making Home Affordable.gov website provides homeowners with detailed information on the Obama administration’s programs to assist homeowners with loan modifications and refinances. Use free self-assessment tools and calculators. Connect with free consulting resources or find homeowner events in your community.

There is a wealth of information available to help homeowners at risk of foreclosure. The Making Home Affordable program was launched specifically to help people facing foreclosure and to revitalize the housing industry. It is there for your benefit.