Loan modification: Role of a hardship letter

Loan modification: Role of a hardship letterAuthor: Samantha Taylor

Loan modification: Role of a hardship letter

Loan modification is something a lot of you may be looking forward to. But the fact is that not all individuals can get modification for a loan. The creditors need to be really convinced that you are having trouble paying up the debt and only then maybe they would agree to some kind of loan modification.

Scenario: “I own a house and a mortgage on it. I have paid my monthly payments on time and have not yet defaulted on payments. But my problem here is that the price of the house is going down and I also am finding it difficult to keep up with the payment because of the high interest my lender is charging. I would like to apply for a loan modification. I need help with what I need to do if I want to get loan modification?

- John”

Solution: Whether or not a mortgage loan modification will be possible entirely depends on your lender and the way in which you can place your situation in front of him. So, when you approach your lender for modification, you must have it well planned as to what you are going to say to him in order to convince him. Remember that your lender will try to get as much money out of you as possible. Anything that you say may be used against you. So, you have to be very careful about what you say.

Items you would need to keep handy when seeking loan modification:

A hardship letter mentioning why you would like to go for a loan modification. Documents for income and expenditure. All correspondence that you have with the lender. Your last pay stubs. They would like to see if you are really in a hardship and can’t pay. Bank statements for 3 - 6 months. All mortgage paper work.

What is a hardship letter?

A hardship letter is formal information given to the lender to explain why you are no longer able to make the payments on your home loan and your current financial condition. This letter is widely used in order to avoid foreclosure and work out a solution to paying some portion of your mortgage instead of not paying at all.

Your hardship letter must include:

Your (homeowner) name, address and account number Specific dates of hardship (if any in particular) The kind of hardship you are gong through and the reason for the hardship Information regarding your income, expenditure and also mention if there will be any expected positive change in your condition. Information of any lump sum amount that you may have at present to compensate for any default. The time and the ways in which you will be available for the lender.

While writing your hardship letter you must also attach copies of your income proof, documents related to expenditure and other financial statements that highlight your assets, liabilities as well as tax returns, current pay etc. You may refer a sample hardship letter available on the internet when you are writing one.

Once you have all the information ready you may contact your lender and try to negotiate the loan. You may either do it yourself or get a loan modification company to do it for you. But it is suggested that before you can invest the money on the modification company, you must give it a try yourself.

About the Author:

Author: She is the Community Mentor of MortgageFit and has been contributing her suggestions to the Community since 2005. Not just that, she has also made notable contributions through the various articles written on different subjects related to the mortgage industry. Few of her popular articles would include names like 'Mortgage that you can afford', 'Mobile Home Loan with Bad Credit', and How much mortgage can I borrow?'

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