Short sales are a mishmash of paperwork, time, anxiety, and questions, and one of the biggest questions I receive from Massachusetts and New Hampshire homeowners wanting to short sale 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 simple for a homeowner facing foreclosure.
Assuming you truly have a hardship and are just not “walking away” from your home, what I tell homeowners to write is this:
Explain to your lender what circumstances from the time you took out your loan until now, led you to not be able to afford your house and payments.
Therein lies your answer to your hardship.
For most homeowners I’ve worked with they seem to be facing job loss, or reduction in pay, medical reasons, death or divorce/separation, or even a combination of things. There could be many reasons for their hardship, which really should be explained in detail and if possible kept to one page. You are dealing with a bank negotiator with a hundred or so files on their desk. Keep your letter to the one-page max. If you have to write two pages, please cut to the chase for them.
I’ve had great success if a homeowner’s hand writes their hardship letter providing it’s legible and neat for the negotiator to read. It doesn’t mean you can’t type it.
You should always let your lender know you’ve tried to make the payments and wanted to keep your home but cannot afford to at this time. You should also let your lender know that you DO wish to sell. I personally prefer to work with homeowners who have already tried a loan modification. It’s difficult as a buyer to try to start the short sale process and then have a homeowner decide to do a loan modification. Explain to the lender you tried a loan modification, borrowed money, took an extra job, took money out of an IRA or savings, and exhausted your options to pay your mortgage. I’m not advocating taking money out of savings/IRA or borrowing from friends or family, but if you HAVE done that, you really should let the lender know. An example may be:
To Whom It May Concern:
I am writing this letter to explain the terrible circumstances that have caused us to become delinquent on our mortgage payments to you. 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 home payments is (insert reason here and don’t be too lengthy and long-winded) OR The main reason we cannot currently afford our home is (INSERT HARDSHIP EXPLANATION) Our income is not enough or cannot sustain this home and we had fallen further and further behind. Now, it’s to the point where we cannot afford to pay what is owed to (lender).
At this time we have exhausted all of our income and resources so we ask your permission to allow us the sale of our property to start over. We just wish to sell and begin the new chapter of our lives.
Sincerely and Respectfully,
Joe and Ann Homeowner
Make sure you sign and date the letter. If there is anything else you need to include, make sure it’s in a separate letter. For example, last week I met with a homeowner that had no paystubs to include in his short sale package. We wrote up a separate two sentence page addressing why we could not provide those paystubs. DO NOT include that information in your hardship letter. It will likely get missed by your negotiator.
Key points to remember are:
1) Keep it short and to the point
2) DEFINITELY handwrite if you have neat enough writing
3) Sign AND DATE the letter
4) Explain why from point A when you took out the loan FULLY to point Z why you cannot now afford your home
5) Make sure any other pertinent information about your package is put in a separate letter.
For Realtors, Attorneys, Title companies, etc interested in our services please go to http://massachusettslossmitigation.com/
For homeowners needing assistance with avoiding foreclosure please go to http://shortsalemitigation.net/
2500 Main Street,
Tewksbury, MA 01876