How Important is the Hardship Letter While Applying for a Loan Modification?

For most homeowners who are frantically trying to get their mortgages modified before their lender serves them a foreclosure notice, the most important thing for them is to get their application in front of bank officials as soon as they can.

It is surprising however, that most homeowners are so busy in trying to make sure they apply on time, they forget to make sure that they have all the documents that are required in place. What is even more surprising is even if they do have the documents properly filed with their application, they do not pay much attention to the hardship letter. In fact a lot of homeowners are under the impression that a hardship letter simply serves like a cover letter when applying for a loan modification.

This thought could not be further from the truth. A hardship letter is the first thing that your mortgage lender or a bank official will read before even talking to you or checking anything else. A Hardship letter is in fact one of the most important documents you will need if you want your loan modification application to be approved with a lower monthly payment you can afford.

The hardship letter is what tells the bank or mortgage lender why they should consider modifying your loan for you. Think about it this way - why would anyone modify your loan and give you a low monthly payment plan if there is nothing wrong with your situation? Why would they consider modifying you loan if they feel everything is perfectly fine with you and they don't see any problems in the foreseeable future as well?

Hence as a homeowner, you should carefully draft the hardship letter and make sure you cover everything possible so that your lenders knows what kind of problems you are going through and why your mortgage has become or will become unaffordable for you. Remember, without a good reason, banks are most likely to just reject your application or give preference to other homeowners who they feel have a genuine case and needs the loan modification urgently.

Your reason for your mortgage to become unaffordable could be one of many. For example you could lose your job or get a huge pay cut, there could be an illness because of which you cannot work for a certain amount of time, there could be death in the family - someone who was a co-borrower, you could be going through a divorce or simply experienced an accident or natural disaster. There can be plenty of reasons why you would need a loan modification but the important thing is you need to make your lender aware of that reason. You need to be sure that once your lender reads about your hardship, they will be compelled to take the next step and not reject it immediately.

Of course while you mention your hardship, never make it seem that the situation is so bad that you won't even be able to pay the modified mortgage payment. Apart from your current hardship, bank officials will also check on whether you will be able to make the modified mortgage payments they offer you. If they feel you have a genuine problem in meeting your current mortgage requirements but will be able to pay a modified plan then it is more than likely your application could be approved by your lenders.