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Hardship letters are a pivotal piece of a successful loan modification, but most borrowers are woefully lacking in their understanding of what an effective hardship letter should include.

The Hardship Letter Mistakes.

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The number one hardship letter mistake that kills your ability to convince a lender to initiate a loan modification is in the name itself…hardship. Hardship letters, unlike the moniker suggests, are not supposed to be diatribes on how bad your life is. I know that sounds counter-intuitive…and it is, but if you use the hardship letter to ACTUALLY outline your life’s hardships…you will not get a loan mod!

A better name for a Hardship Letter…and the way I want you to think of them from this point forward is…

“You Will Never See Another Missed Payment If” Letter

Kinda clunky I know…but that is the attitude you should have when writing your Hardship Letter. I want you to think like the bank or servicer…and what do they want?

They want to know if they modify your loan they will NEVER See Another Missed Payment from you.

Did you know that a recent study was conducted and over 53% of the loans modified last year are back in default today?

Can you now see why it is important to set yourself apart with your “hardship” letter?

Here is a Sample Hardship Letter.

Your letter should address the money you make now and the payment modification necessary to never go into default again. This is usually about 40% of your gross household income. If you make $5000 gross per month then you would need a payment modification down to $2,000 PITI.

Never submit a request that is “half-baked” on the income or the estimate of new payment. Now that you know how to handle estimating a reasonable loan mod payment, we will discuss income.

Your letter should outline your current VERIFIABLE gross monthly household income. I hope it goes without saying you should have already eliminated most consumer expenses by canceling cable, magazine subscriptions and eating out…if you have not…you are not serious about saving your home. You can then say in your hardship letter something like what I have put below in our sample hardship letter:

“I have no consumer expenses anymore other than my car to get to work and back and the other necessities. My current monthly household income is $X. If you could modify my total PITI payment down to $Y (you calculated this to be 40% of $X above remember), I would never miss another payment. I am prepared to send you the verification documentation of my income at your request. Please inform me what documents you will need and who to address them to and you will have them.”

The simply fact is a hardship letter is not effective if eliciting sympathy is the only goal of the letter. Sure you will get sympathy…maybe…but no loan modification will follow. I want you to get the loan mod, so eliminate trying to gain their sympathy, and just explain how they can help you stay out of default.

Thinking like a banker is not hard…talking like one is a little more difficult. We can help…check out our Loan Mod category

Good Luck!

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