A basic loan modification requirement is to demonstrate to your lending institution that you are faced with a financial hardship situation. You need to present enough evidence to convince your lender that, due to your current circumstances, you need to negotiate a lower monthly payment with them.
Some mortgage holders find the process of composing this letter somewhat intimidating. However, bear in mind that lenders are highly motivated right now to approve borrowers under the new Obama guidelines. A hardship letter is your opportunity to let your bank know what has happened since they originated your mortgage, and why you must get a modification on your current terms. Below is a letter that will give you a starting point for composing one of your own.
Lending institution name and address.
Your name, your address, and your loan number.
This letter is to explain to you, my current financial circumstances, and to request a loan modification from your institution, so that I may stay in my home. My family and I do not want to lose our home, and we are willing to work with you to do whatever it takes to stay here.
We became delinquent on our mortgage payment, due to my husband's job layoff. He was employed for five years, but then he was out of work for four months. During those four months, we needed to spend our savings to buy groceries and pay our basic bills, to make ends meet, we cut back on our expenses by any means possible. Now however, we have depleted our savings and must use credit cards simply to pay for living expenses, and to keep up with other bills.
The good news is that recently my husband started a new job. While his pay is less than what he earned before, we have adjusted our budget, as necessary. With a modified monthly mortgage payment, we will be able to afford to stay in our home. As you may know, due to declining property values all around, our houses value has declined so much that selling or refinancing is not a possibility. Renegotiating our loan with you is our only option.
In light of our family's circumstances, please consider as for President Obama's home affordable plan, or whatever other program we might qualify for through your bank. We are hard-working, responsible homeowners, simply trying to keep our family's home. Please review our enclosed application, and consider us for a rate reduction to 2%, with 40 year terms. Thank you very much for your consideration, and we are most eagerly awaiting your response.
Of course, you will need to use this letter as a template. Personalize it as necessary, describing your own particular circumstances. The main points are to be descriptive, yet three, providing a few details to try to gain your lender's sympathy. Also, you will be required to demonstrate your ability to meet the new modified payment terms of the loan. This means that you'll need to submit to your lender a budget detailing your expenses and income. Show your lender in black and white terms that you we'll be able to afford the renegotiated terms of your current agreement with them. A budget that includes a small provision for emergencies each month will lend credibility to your application.
Once you understand how to write an effective loan modification hardship letter, you stand a good chance of qualifying for a home loan modification that allows you to stay in your home. You'll need to complete a financial statement, so begin by assembling any necessary documentation for this. Wait to contact your lender until you have all your paperwork together. By being thoroughly prepared, you stand the best possible chance of saving your home, under this once-in-a-lifetime plan.