Writing a successful hardship letter to your bank or lender can be an excellent way to negotiate new payment terms or ask for leniency during a temporary financial hardship. Everyone has moments in their lives where things get out control, but there are things you can do to put them right again. When you’re in foreclosure, writing a hardship letter is one of those essential things.
Unfortunately, many people get the basics wrong.
When your bank begins reading your hardship letter, they have two main things on their mind. First, they want to know what your plan is to fix the fact that you’re behind on payments. The second is why your plan will work.
What’s Your Plan?
When sitting down to write their bank, most people want to explain how difficult their lives are or how bad their current situation is. It’s a natural response. If you’re suffering, it can be hard to avoid simply focusing on the causes of your hardship. But banks aren’t in business to feel sympathy for you. Banks are in business to make a profit.
Lenders want to know what you’re going to do to help improve your situation and catch up any delinquent payments. They don’t need to know how you lost your job and they really don’t want to know how upset your family is about losing their home. They want to hear a realistic plan to catch up your missed payments and not be late in the future.
You should write your letter so they understand your financial hardship is only temporary and you’re taking action to remedy it in a structured and realistic way. Keep the tone of your writing positive and as upbeat as possible. Avoid trying to win any sympathy. Your bank’s staff deals with angry, hurt, negative people every day. Present yourself as a positive, rational customer with definite plans to catch up any delinquent payments and maintain a good payment record going forward.
Take some time to figure out exactly what you can afford to pay them in your current situation. They like to see that you’ll at least be paying a small amount each month toward any arrears because it shows them you’re serious about your obligations and you’re thinking practically about practical solutions to get you out of financial trouble.
Why Will It Work?
There’s absolutely no point requesting a mortgage modification if your plan is never going to work.
If you could look at most hardship letters, you’d see that most never explain why their plan will be successful or, if they do, their reasoning boils down to their belief in themselves and their hope that their situation is going to improve.
And while hope is essential for us personally, lenders can’t operate on it. They need cold hard facts. You need to tell them exactly why your plan will work and then give them concrete proof (like pay stubs from a new job or a release to go back to work from your doctor) to show that your condition is changing for the better.
If your hardship is simply that your payment is recasting or resetting, you need to prove to your lender using your current income and expenses that your proposal will work and that the long-term odds that you’ll continue paying on time are in your favor.
Last Thoughts
Stay focused and positive. Work out exactly what you’d like your bank to help you with and then explain to them why it will work. Your letter doesn’t need to be fancy or worded like a college professor…it just needs to be truthful, believable, and realistic.