Here is a specific example of a hardship letter you could use for a loan modification if you fall behind in your payments. For a little more detail on putting a hardship letter together see: Tips on How to Write a Hardship Letter for a Loan Modification or Short Sale.

A hardship letter is a letter written to your bank or mortgage company telling them why you can no longer afford to make the payments on your home. This letter describes your hardships and specifically what has happened that caused you to fall behind.

Based on the current credit environment, hardship letters are being used as a tool to help homeowners avoid foreclosure on their homes. The result can be a modification of the loan or the acceptance of a real-estate short sale by the bank.

Sample Hardship Letter for Loan Modification:

(Date)

To Whom It May Concern:

Our family purchased our home in (Date).

Since that time, a number of unfortunate circumstances have impacted us. These circumstances combined with the rising costs of food and the economic slow down have caused us to be delinquent on our mortgage payments. We love our home and want to stay in it and would like you to consider working with us to modify our loan.

In the last few months our financial situation has gotten difficult. Specifically, (This is where you need to explain the specifics of your situation. Example: Our adjustable interest rate went up and our payments increased from $x to $y, lost one of our jobs, medical emergency….). As a result of these unfortunate circumstances we can no longer afford our mortgage payments.

We feel that if we could get our loan modified, we would be in a better situation and could make our payments. We would appreciate if you can work with us to lower our payment so we can keep our home.

We have enclosed copies of our financial statements.

(You would attach copies of proof of income {paycheck stubs…}, Proof of hardship {late notices you received recently}, Bank Statements for last 2 months, past 2 years income tax return)

We appreciate all of your help as our family goes through these hardships.

Sincerely,

Home Owner Name(s) ___________________

Signature_____________________

Loan # ______________________

Address______________________

Phone________________________

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• New programs help homeowners, but are too late for some (seattletimes.nwsource.com)

If you are behind in your mortgage payments, it is likely you have received a Notice of Default (NOD) also known as a Foreclosure notice from your lender. A Notice of Default (NOD) is a public notice to you, as well as the world, that you have defaulted on your mortgage and the lender intends to take foreclosure action if you do not pay by the regulated redemption period. What should you do if you receive a NOD?

Immediately Contact the Lender

You must NOT ignore the NOD, other foreclosure proceedings, or your lender. Call them at once and tell them about your situation. Most lenders are willing to work with their borrowers on keeping their loan in good standing and helping through financial difficulty to ultimately avoid foreclosure. The problem arises when borrowers have financial difficulty and simply stop paying on their mortgage without any explanation to the lender.

Discuss the Mortgage Payment Options

When you contact your mortgage lender, discuss with them your financial situation and what you can do to keep your loan current. If you have a significant change in your income, or your mortgage payment was increased considerably, you may be eligible for a loan modification based on your current income.

A loan modification changes the terms of the loan, such as the interest rate or lifespan of the loan, to create a lower monthly payment. While this means less income for the lender, if you are unable to meet your current mortgage obligation, yet still have a regular income, it is a better alternative than foreclosure. You will have to provide financial information and a hardship letter to your lender. If you are not comfortable with mortgage terms and issues, hire a professional service to negotiate on your behalf.

In addition, you may discuss payment forbearance or forgiveness of past-due debt. In many cases, lenders are willing to forbear loan payments up to three to six months to help a borrower get back on his feet financially. In cases of extreme financial difficulty, some lenders may even forgive payments and fees in arrears and allow the borrower to start fresh if they promise to keep current.

Consider a Short Sale Before a Foreclosure

There is almost no reason to walk away from a home and allow a lender to foreclose. If, ultimately, you cannot afford the mortgage, you can sell the home and pay the lender what is owed on the mortgage. However, this may be more difficult if you owe more than what your home is worth on the market. Many homeowners in mortgage trouble are finding this to be the case with falling real estate market values.

However, a lender can be persuaded to accept a “short sale” on a home. In this situation, they agree to let you sell the home for the lower market value, pay them the full proceeds from the sale, and then write off the outstanding balance. Why do lenders agree to a short sale? Ultimately, it is cheaper than proceeding through a full foreclosure process, which involves attorney’s fees, holding losses, and an inevitable short sale from the lender’s end as well.

A NOD is not the end of the road for a homeowner. It is just the first legal process in foreclosure. Remember that you have the right to discuss and re-negotiate your mortgage. Although you may lose your home, there are options to sell so that the lender does not foreclose and you prevent further credit issues.

If you are having trouble keeping up with your mortgage payments and find yourself needing foreclosure help, you are not alone. Millions of homeowners have lost their homes due to foreclosure over the last few years. In 2008 alone, over three million foreclosures occurred in the United States. If you are in foreclosure now, what should you expect and how can you manage this stressful situation?

What is Foreclosure?

Foreclosure, also called default on a mortgage, occurs when a borrower fails to meet the terms of a mortgage secured by real estate. Usually, the first stage of default is delinquency caused by a late payment.

If a borrower continues a delinquency and fails to make the scheduled payment and subsequent payments, the mortgage company will begin the foreclosure process by filing a Notice of Default (NOD). This is a public notice filed in the home’s county recorder that describes the borrower’s default, as well as confirms the lender’s intention to foreclose on the home if the mortgage is not promptly brought up to date.

How Does the Foreclosure Process Unfold?

The process of foreclosure after the NOD is different from state to state. Some states have requirements that mortgage lenders give plenty of time for a borrower to redeem the mortgage and keep their home. This process can take up to a year and even up to two years from the beginning process of foreclosure until a defaulted homeowner is evicted and the house sold at auction. Some states, on the other hand, allow lenders to give little time for loan redemption, and the final foreclosure could occur in less than a year.

However, all homeowners in the foreclosure process can expect many letters from the lender and the lender’s attorney asking and demanding that the loan is paid, even while they are pursuing foreclosure. Once a homeowner fails to redeem their loan during the NOD timetable, the mortgage lender proceeds with asking for a judicial or non-judicial (depending on state laws) home sale and auction to recover their losses. As mentioned, a foreclosure auction sale could be months, even a year or more, after the first delinquency.

What Are Alternatives To Foreclosure?

If a homeowner truly wants to keep their home, they should talk with their lender about alternate solutions. Here are some possibilities to avoid foreclosure:

• Loan Modification – Negotiate with the lender to change the interest rate or other terms that can effectively lower a monthly mortgage payment to a more affordable level. You will have to detail your financial statements and present a hardship case and hardship letter to your bank.  Sometimes this may require the help from a professional mortgage modification specialist company.
• Forbearance – In some cases, a mortgage lender may be willing to issue forbearance on payments for a limited time, usually three to six months, giving the borrower time to get caught up on his finances.
• Short Sale – If a borrower cannot financially afford the mortgage any longer, he or she may be forced to sell the home in order to pay the mortgage in full. However, what if the final selling price is less than what is owed on the mortgage? A mortgage company may agree to a “short sale,” where they accept the market price for the home and write off the balance. This is a better alternative than foreclosure for both the lender and borrower.

Foreclosure is a last resort for a homeowner who can no longer afford a mortgage. The best practice to avoid this process is to constantly keep in contact with a lender and work out an agreement that avoids the hassle, expense and defeated humility of foreclosure.

A hardship letter is a letter written to your bank or mortgage company telling them why you can no longer afford to make the payments on your home. This letter describes your hardships and specifically what has happened that caused you to fall behind.

Based on the current credit environment, hardship letters are being used as a tool to help homeowners avoid foreclosure on their homes. The result can be a modification of the loan or the acceptance of a real-estate short sale by the bank.

Some basics to remember in writing your hard ship letter are to:
• Write the letter in your own words with feeling. Also show your appreciation for their time. A real person will be reading this.
• Be specific on your hardship. Good examples of hardships would be: A significant cut in pay or loss of employment, a medical issue that prevents you from working, or becoming a single parent with out child support.
• Provide the reason you fell behind on your monthly payments. Detail each delinquency with specific dates.
• Provide an offer to resolve the debt issue and show a willingness to cooperate in a solution to retain your home.
• Provide documents that show that your are having financial hardship. Examples could be recent late notices on bills, your taxes from the previous year and your bank statements.

For specific examples of a hardship letter you can use click here:  Sample Hardship Letter For Loan Modification