Free Financial Hardship Letter Samples A Guide To Mortgage Assistance Applications

A financial hardship letter is a document that borrowers can use to explain their financial difficulties to lenders when they're unable to make their mortgage payments. These letters are an important part of the loan modification or forbearance application process, providing lenders with context about the borrower's situation. Free templates and samples are available to help borrowers create effective hardship letters that clearly communicate their circumstances and request appropriate assistance.

Understanding Financial Hardship Letters

A financial hardship letter is a written document in which a borrower details their financial situation to a lender in hopes of receiving assistance such as a payment extension, reduction, or loan modification. The letter explains why the borrower is currently unable to make their mortgage payments and provides specific details about the hardship, including when it began, how it was caused, and how long it may continue.

These letters serve as formal communication between borrowers and lenders during challenging financial times. They are typically required as part of the loss mitigation application process, which includes other documentation like pay stubs, tax returns, financial statements, and bank statements as requested by the loan servicer.

Financial hardship letters are needed when unforeseen events outside of a borrower's control prevent them from meeting their financial obligations. These letters aim to let lenders know why payments haven't been made and to request assistance in finding a mutually beneficial solution. The primary goal is often to avoid foreclosure and maintain homeownership through some form of loan modification or temporary payment adjustment.

Common Hardship Situations

A "hardship" is defined as a circumstance beyond a borrower's control that has resulted in a situation where they can no longer afford to make their current mortgage payments. Hardships that qualify borrowers for loss mitigation options generally include various life events and financial challenges. While not an exhaustive list, common qualifying hardships include:

• Job loss or reduction in income
• Medical emergencies or significant healthcare costs
• Divorce or separation
• Death of a family member
• Natural disasters or property damage
• Military deployment
• Incarceration
• Business failure
• Adjustable-rate mortgage increases

It's important to note that this list isn't comprehensive, and other hardships may also be valid. Borrowers might have experienced a qualifying hardship without even realizing it. For assistance in determining what hardship applies to their situation, borrowers can consult with their spouse, lawyer, or a HUD-approved housing counselor to reconstruct the series of events that have led to their current financial circumstances.

Components of an Effective Hardship Letter

When writing a hardship letter, borrowers should include several key components to ensure their request is clear and complete. An effective letter should contain:

Contact Information: The letter should begin with the borrower's full name, address, email address, and phone number. This ensures the lender has all necessary contact information to respond to the request.

Loan Account Number: Including the specific loan or mortgage account number helps the lender match the hardship letter to the correct file, preventing processing delays.

Description of Hardship: A brief, honest explanation of what caused the financial hardship is essential. Borrowers should be straightforward but avoid unnecessary details. One paragraph explaining the hardship is typically sufficient. For example: "We lost our household's main source of income when I was laid off in March. Since then, we have been relying on a reduced income and have fallen behind on our mortgage payments."

Timeline of Hardship: Borrowers should state when the hardship began, how it impacted their ability to make payments, and whether the issue is temporary or permanent. If the situation has improved or is expected to improve, that information should be included. For example: "We expect to return to full-time employment within the next six months. In the meantime, we are requesting a temporary reduction in monthly payments."

Specific Request for Assistance: The letter should clearly state what kind of help the borrower needs. This could include a loan modification, reduced payments, forbearance, or other forms of financial assistance. For example: "We would appreciate it if you could work with us to lower the delinquent amount owed or adjust our payment so we can keep our home."

Sample Hardship Letter Template

Below is a sample hardship letter template that borrowers can use as a guide. It's important to customize this template with personal information and specific details about your situation.

``` Name: (Your Name) Address: (Your Address) Email: (Your Email Address) Phone Number: (Your Phone Number)

To Whom It May Concern:

I am writing this letter to explain the unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home, and we would really appreciate the opportunity to do that.

The main reason that caused us to be late is (insert reason here). Soon after being late and our income not being nearly enough, we had fallen further behind. Now, we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time, we have exhausted our income and resources, so we are turning to you for help.

(The approximate date of hardship and whether we believe it is temporary or permanent.)

Our situation has improved because (reason here), and we feel that a loan modification would benefit us both. We would appreciate it if you could work with us to lower the delinquent amount owed or adjust our payment so we can keep our home.

We truly hope that you will consider working with us and we are eager to get this resolved.

Sincerely and Respectfully,

Borrower's Signature Date Co-Borrower's Signature Date ```

When using this template, borrowers should:

• Replace all placeholder information in parentheses with their specific details
• Be honest about their situation while maintaining a respectful tone
• Keep the letter focused on key points without including unnecessary details
• Ensure all contact information is accurate
• Include the loan account number for proper processing
• Sign the letter before sending

Tips for Writing an Effective Hardship Letter

Writing an effective hardship letter requires careful attention to both content and presentation. The following tips can help borrowers create a compelling letter that effectively communicates their situation to their lender:

Be Personal, But Keep It Semi-Formal: While borrowers may be experiencing emotional distress, the letter should maintain a semi-formal tone and focus on factual information. The goal is to prove eligibility for financial assistance, not to elicit sympathy. Letters should be original and genuine, using templates only as a starting point rather than as complete solutions.

Keep The Letter Short And Concise: Borrowers should resist the temptation to embellish their story or provide excessive backstory. Effective hardship letters are simple, direct, and use basic language to ensure clarity. Ideally, the letter should be one page and less than 450 words, focusing only on relevant details without unnecessary information.

State The Problem Clearly: Borrowers need to explain exactly what is causing their inability to make mortgage payments. The explanation should be straightforward and honest, without adding fluff or irrelevant details. Specificity about the nature and duration of the hardship helps lenders understand the situation better.

Include All Necessary Information: The letter should include accurate contact information, the loan account number, a clear description of the hardship, the timeline of the hardship, and a specific request for assistance. Borrowers should verify that all information is correct before sending to prevent processing delays.

Use Appropriate Language: Borrowers should use professional language and avoid emotional appeals, blame, or excuses. Phrases like "We have done everything in our power to make ends meet" and "Our number one goal is to keep our home" demonstrate responsibility and commitment to resolving the situation.

Get The Letter Reviewed: Before sending, borrowers should have their letter reviewed by a close family member, financial coach, or credit counselor. This helps ensure all necessary details are included and the letter is free from grammar and spelling errors that might diminish its effectiveness.

Be Honest And Clear: The goal is to provide an honest and clear explanation of the current financial situation so the lender can consider a mutually beneficial solution. Borrowers should avoid exaggeration or minimization of their circumstances.

Additional Resources and Options

While writing a hardship letter is an important step, borrowers should be aware of other resources and options available when facing financial difficulties:

Nonprofit Credit Counseling Agencies: Organizations like Credit.org offer free guidance through the hardship letter writing process. Their counselors can help borrowers develop realistic payment plans, maintain notes for their file, and understand all available options.

HUD-Approved Housing Counselors: These professionals can provide assistance in determining what hardship applies to a borrower's situation and help reconstruct the series of events leading to financial difficulties.

Loss Mitigation Options: Beyond loan modifications, borrowers may be eligible for various loss mitigation programs designed to help avoid foreclosure. These options vary by lender and loan type but may include repayment plans, partial claims, or deed-in-lieu of foreclosure.

Forbearance and Deferment Plans: For mortgage relief, borrowers may receive forbearance plans that temporarily pause mortgage payments to give time to catch up on finances. Deferment may also be offered, which pushes missed payments during the forbearance period to be due at the end of the loan term.

Refinancing Options: In some cases, borrowers may be able to refinance into a lower payment before facing the risk of default or foreclosure. While not always an option, refinancing can help borrowers get ahead of potential financial issues.

It's important for borrowers to speak with their loan servicer first to determine what options are available and whether a hardship letter is necessary. Some lenders may have specific requirements or additional forms beyond the hardship letter that need to be completed.

Conclusion

Financial hardship letters serve as a critical communication tool between borrowers and lenders during difficult financial times. These letters provide context for payment difficulties and formally request assistance in finding a solution that allows borrowers to maintain homeownership. Free templates and samples are available to help borrowers create effective hardship letters that include all necessary components while maintaining a professional tone.

When writing a hardship letter, borrowers should focus on being honest, clear, and concise while including all relevant information about their situation. Personalizing a template with specific details about the hardship, its timeline, and the requested assistance increases the likelihood of a positive response from the lender.

Borrowers facing financial difficulties should not hesitate to seek assistance from nonprofit credit counseling agencies, HUD-approved housing counselors, or their loan servicer. These resources can provide guidance on writing effective hardship letters and understanding all available options for mortgage relief.

By taking proactive steps to communicate with lenders through well-crafted hardship letters and exploring available assistance programs, borrowers can increase their chances of finding a solution that allows them to keep their homes during challenging financial periods.

Sources

1. Free Financial Hardship Letter Sample and Template
2. Writing a Hardship Letter for Foreclosure Defense
3. Financial Hardship Letter Example