Your Hardship Letter

A document usually required by mortgage lenders in order to consider the request of a short sale by a property owner is the Letter of Hardship.

In essence it is an explanation of how the circumstances have changed and the property owner is no longer able to pay their mortgage.  

How should you write this Hardship Letter?

Start indicating any changes that has happened between the time of your purchase and the present time, which is impairing your ability to pay.  

For example:  I bought this property on (date) and lately significant events have changed my financial ability…etc.

Explain with full details all the reasons that make the ownership of this property unaffordable to you at the present time. 

Mention all the financial problems that are causing the problem:

Is it a lot of income due to a layoff?  

Or a reduction of your base salary or your hours of work?

Or perhaps losses incurred due to bad financial investments?

A divorce? 

Child college education bills? 

High credit card debt? 

A sudden illness of yourself or a member of your family that is draining your resources or reducing your ability to work?  

Try to prioritize the list and emphasize the most relevant factors.

Remember that a lender will not accept as a financial hardship the fact that the present value of your property is less than the mortgage amount that you owe, or the fact that paying the loan does not make sense because of the current downward turn of the real estate market.

Mention factors that are affecting the value of your property and its possible normal sale. For example:  that property values in the surrounding area have dropped substantially, that there had been many foreclosures in your vicinity; that you have tried to list it for sale without much success.

State firmly that you are completely unable to pay the loan at this time and that the only option that is left is a short sale.

Maintain a respectful tone in your letter. Sign and date your letter. Alternatively indicate the loan number.

You can type the letter, but it can also be handwritten. That would bring in an element of closeness and sincerity, and any additional touch of personal feelings in this difficult and involuntary situation might be a positive note.