Regardless of the specifics of your situation, a properly written hardship letter should always address key factors: Loss mitigator, reading your letter, would have to know why, what and how.
Why? (…are you writing a hardship letter)
This should always be a first paragraph. It is an opening to all future dialogs with the lender Loss Mitigation Department. Nobody cares if your dog broke a leg and you spent all the money on your vet bills. Your job is not to seek sympathy; your job is to explain (within one or two paragraphs) why the amount of money coming in, is less to the amount of money going out. It’s that simple.
A good example of an opening paragraph would be “I am contacting you today to request a loan modification (short sale, reinstatement, whatever) and explain the circumstances that have caused us to fall behind on our mortgage (line of credit, credit cards, etc)”. I like this opening statement because it achieves two major objectives. First, you are letting them know there is a solution, even though it hasn’t been presented to you yet. Second, you are planting the seed of an alternative –a better option for your lender to consider.
Continue the conversation by providing a more detailed summary of “Why?” you’ve missed the payments. Be careful not to trap yourself inside your explanation. What I mean is don’t give details such as “I used to make $ 756.75 per week and now its $543.92”. A better way would be “The industry I’m employed in, experienced a significant slowdown. My employer in particular, reduced its workforce by 20%. I’m thankful for having seniority, which has allowed me to continue my employment, although my work hours have been significantly reduced”.
In most cases, I would recommend tailoring examples from above as an opening part to any hardship letter. Modify the statements as you wish to fit your particular situation, and avoid irrelevant information. Remember the person reading your letter has heard it all, from clever to downright stupid. So keep it brief and to the point.
What? (…are you proposing in a hardship letter)
Please note that facts in this section will ultimately lead to the amount of final settlement.
Tell the reader EXACTLY what you are looking for. Well, maybe not exactly. The objective is to let the mitigator know a solution that will work for you.
For example, let’s take loan modification. Saying something like “if you will reduce my monthly payment by X amount…” may prove to be counterproductive. Your goal is to steer the adjustor into proposing the lowest possible payment. By giving specific numbers you are potentially limiting yourself from getting a better deal. All you know is that lower payment will help. You also know that X amount is what you are looking for. So leave it at that.
Negotiation is an art, and the letter of hardship certainly falls into that category. Trapping yourself from the beginning into something rigid, like X amount, is a big mistake in any negotiation strategy. Enough has been written on that subject, so I’ll spare you “IMHO” and back to the letter.
Suggesting a path to resolution, is the message you want to convey. Simply write “Constant strain from exorbitant mortgage payments, has made it impossible to provide basic necessities for my family. Reduced work hours, combined with recent mortgage rate increases has caused me to fall behind on payments”. It’s simple and to the point.
For some people, this is the hardest idea to grasp. The bank’s objective is to avoid the worst case scenario, which is foreclosure. It’s not to say that you will get the red carpet treatment. You will however, be presented with options, so it’s always better to let the bank give you the numbers first. There will be plenty of opportunities to negotiate actual numbers once the dialogue is open. The hardship letter is simply the first step in seeking a solution.
How? (…your poposition will solve the problem)
As you are writing this letter, think about why are you writing this letter? The point I’m making is that you are in this unfortunate situation because payments were missed. The credibility has been damaged. Will get back to this point a little later…
The mitigator’s job is to assess a number of factors. On the contrary, the “mitigator” title, his / her job is to reduce bank’s losses. Having a bullet proof “How?” is the key to working out the deal. The temptation to provide actual numbers or terms should be avoided. Instead, suggest how lower payments will allow you to keep up with ALL obligations.
Keep it brief and make sure reduced payments (or whatever else you are seeking) will indeed solve the problem. If all your payments equal your income you’ll never make it. There always going to be that unexpected expense, and last thing you want is to fall behind again. Don’t overlook the importance of working out the deal which will provide you with a little money for the unexpected.
My view is that adjuster will pull an updated credit report and see that $400 credit card payment, that department store card, that auto loan with 37 payments remaining. There is no need to provide the specifics in the actual letter. Instead include a separate spread sheet containing money in / money out statement.
Now, back to credibility. The single most important factor that is considered by a lender is a likelihood of this loan going back into default. I encourage you to read the previous sentence again. Did you read it? Now think about it, here you are with missed payments, other debt and lower income asking a lender to refinance the loan. Are you out of your mind?
Well, you’re not! Millions of consumers have been able to get out of high interest loans, reduce their balances, and keep their homes. Structuring the Hardship Letter in a precise, easy to read form, will give you an edge, but addressing the why, what and how, will give you credibility with the mitigator.
Below are downloadable FREE HARDSHIP letters samples you may use. Just remember to put you name instead of “Your Name Here”… 
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