Short sales are a hodgepodge of paperwork, time, anxiety, and questions, and one of the biggest questions I get from homeowners looking to sell their home is, “What do I write in my hardship letter to the lender?” This is a simple question to answer, but the details of most hardships are never straightforward for a homeowner facing foreclosure.
Assuming you really have a hardship and are simply not “moving away” from your home, what I tell homeowners to write is this: Explain to your lender what circumstances, from the time you applied for the loan to now, led to not being able to afford your house and payments.
Therein lies your answer to your difficulties.
For most of the homeowners I have worked with, they seem to be dealing with job loss or salary reduction, medical reasons, death or divorce / separation, or even a combination of things. There can be many reasons for your difficulties, which really should be explained in detail and, if possible, kept to one page. You are dealing with a bank negotiator with a hundred files on his desk. Keep your letter to one page maximum. If you have two pages to write, get to the point.
I have had great success if a landlord’s hand writes his hardship letter as long as it is legible and neat for the negotiator to read. It doesn’t mean you can’t write it.
You should always inform your lender that you have tried to make the payments and wanted to keep your home, but cannot afford it at this time. You must also inform your lender that you DO want to sell. Personally, I prefer to work with homeowners who have already tried a loan modification. It is difficult as a buyer to try to start the short sale process and then make the homeowner decide to do a loan modification. Explain to the lender that you tried a loan modification, borrowed money, took an extra job, took money out of an IRA or savings account, and exhausted your options to pay your mortgage. I’m not advocating taking money out of savings / IRAs, or borrowing from friends or family, but if you HAVE done that, you really should inform the lender.
An example can be:
To whom It May Concern:
I am writing this letter to explain the dire circumstances that have caused us to become behind on our mortgage payments. We have tried everything to make ends meet, but unfortunately we have fallen short. The main reason we have not been able to keep up with our house payments is (insert reason here and don’t go too long) OR The main reason we are currently unable to pay for our house is (INSERT AN EXPLANATION OF THE DIFFICULTIES) Our income is not enough or we cannot support this household and we had fallen further and further behind. Now, it’s gotten to the point where we can’t afford to pay what (the lender) is owed.
At this time we have exhausted all of our income and resources, so we ask for your permission to allow us to start the sale of our property again. We just want to sell and start the new chapter of our lives. Sincerely and respectfully, Joe and Ann Homeowner
Be sure to sign and date the letter. If there is anything else you need to include, make sure it is in a separate letter. For example, last week I met with a homeowner who did not have pay stubs to include in his short sale package. We wrote a separate two-sentence page to explain why we couldn’t provide those pay stubs. DO NOT include that information in your hardship letter. Your negotiator will likely overlook it.
The key points to remember are:
1) Be short and direct
2) DEFINITELY write by hand if you have neat enough writing
3) Sign AND DATE the letter
4) Explain why from point A when you got the loan COMPLETELY to point Z why you can’t pay your house now
5) Make sure any other relevant information about your package is included in a separate letter.
If you have any questions, don’t hesitate to contact me.
Little maryann
Acquisition and Pre-Foreclosure Negotiation, Massachusetts and New Hampshire
http://rapidpropertyrelief.com
978-376-3718
