One piece of the mortgage modification or refinancing process that borrowers always mess up is the hardship letter. Every bank that is thinking about giving the borrowers an alternative to escape the foreclosure procedures will request a detailed letter explaining what initially caused the missing of monthly payments, as well as what steps have been taken to fix the problem.
Many homeowners, though, include very quick hardship letters that explain almost nothing about what transpired, what has been done to correct the situation, and why the financial crisis was only temporary in nature. In reading dozens of these letters over the years, it seems that many homeowners do not understand what to include when writing the bank.
The most vital part of the letter is the documentation of what happened to cause the crisis. This should be as detailed as possible, because lenders will want to make sure that it was an actual hardship that caused the debtors to become delinquent in payments. Something like a job loss or huge medical expense will be given more credibility than a sick cat or broken TV that was replaced.
It is also necessary that homeowners include dates and time frames during which portions of the situation occurred. Banks do not want vague accounts of losing a job and then finding one. They want to know what month the hardship happened, then what was done in the meantime while payments were being omitted, then when exactly a new job was started.
Finally, buyers should include a specific call to action that they want their bank to take. Whether it is modifying a mortgage or accepting a deed in lieu of foreclosure, unless the bank is aware of exactly what the borrowers request, they may not know what to do with the workout paperwork. Being transparent about their intentions with the household is the best way for owners to communicate with lenders.
The hardship letter is a mandatory piece of the package of documents that lenders require before negotiating with borrowers. Homeowners should take the opportunity to account for what happened to cause them to become delinquent in as specific a manner as they can. This is their opportunity to prove that they are not bad clients and deserve a second chance to save their home.
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