A Hardship Letter is one of the most important elements in coordinating a successful “Work Out” scenario with your lender.
This is your chance to appeal to them and ask for help. The letter must be honest and represent the facts clearly. This should not be used to complain to what the lender has done or not done. This could make your situation worse. The Hardship Letter must prove to them that the situation that caused you to fall behind was temporary and you are now in a position to make your payments on time or that you are proposing a solution, such as a Short Sale that will help resolve the situation.
A Short Sale, is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the borrower. The home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Click here to have a Short Sale Specialist contact you, No Cost, No Obligation.
What are the Options?
A. Stay in your home and continue to find ways to make the payments. Many people feel disgruntled when their property values dip below what they paid or owe on the property. They feel someone owes them something, and they try and take it out on the house, the lender, or themselves. Real Estate cycles are just that... cycles. The go up and they come down (or go down and then come up, depending when you purchased). If you let your home go just because home values went down, you are only hurting yourself and your family. You will be damaging your credit, making it more difficult to find a place to rent (landlords check your credit), continually moving from place to place, creating instability. And just because you rent, don't think your problems are over. I cannot tell you how many times I hear "I have to move because my landlord is losing the house..." If it is an "Option", and you can stay in your home, that is your best choice. (Remember: Buy Low, Sell High - NOT Buy High, Sell Low) Values will come back. The question is, where will you be when they do.
B. Foreclosure. This will affect your credit and long term ability to purchase another home in the future.
C. Find a Miracle Worker. Find someone who is heavy in the promises, requires lots of upfront money, and after several months of false hope, will offer to help walk you through the Foreclosure process (for an extra fee - of course!). This was their intention from the very beginning.
You may be a little disoriented right now and wanting to put your trust in someone. That is normal, but be careful that you are not just believing what you want to hear. We tend to do this when we are drowning and someone appears to be lending a "helping hand". I could offer lots of examples of companies scamming people like this, but these businesses are not legitimate and often get shut down! How can you spot them? They promise a lot, require up-front money and sound too good to be true.
D. Short Sale For most people, this is the best option.
In Conclusion:
When we started this website, Our goal was to help homeowners nationwide keep their home and achieve long term affordable payments.
The high number of people who want to do a "Short-Refinance" or the "Hope For Homeowner Program" compared to those professionals skilled and capable of handling the volume properly... is way out of proportion.
Recent relief plans by the new administration have not made any significant offers to help out homeowners or streamline the process, especially in areas where home values have fallen sharply. Until this changes, we have made a decision to not offer that option for new clients.
In the mean time, you may find yourself wanting to do something now and would like to discuss you option of doing a short sale. If so, and you would like to be introduced to a pre-qualified Realtor who specializes in your neighborhood and understands situations like yours, please fill out the Short Sale Form. We will put you in touch with someone who we think can help. We respect your privacy (No cost, No Obligation).
- If you are facing foreclosure and don't have thoughts of keeping your home, find a specialist to negotiate a short-sale.
- If you already have someone to purchase the home, but need a short sale negotiated, click here. Or, if you do not have a potential buyer, but feel the only way to get out of the house is through a short sale, need help to negotiate a pre-sale price with your current lender, click here. This will allow you to put the house on the market for sale at a set short sale price, and sale the home quickly.
- If you have decided that it is in your best interest to do a Short Sale, you will want to have an experienced professional in this field contact you as soon as possible. Apply for Short Sale, No Cost, No Obligation.
You must also have a legitimate excuse for falling behind on your payments. Simply stating that you are experiencing financial problems is not an adequate excuse. Loss of a job, death in the family or an illness would be an acceptable reason to fall behind on your mortgage temporarily.
A well-crafted short sale hardship letter can significantly increase your chances of having your offer accepted. Recent reports claim foreclosure rates are rapidly escalating.
Lenders are receiving short sale offers at an alarming rate. Experts suggest only one out of ten proposals are accepted and it's important to create an organized and well-documented short sale package. In order to apply for a short sale, the first thing you'll need to do is contact your lender's Loss Mitigation Department. Individuals who work in this department are known as Loss Mitigators. A personal mitigator will be assigned to your account and will work with you to resolve the situation. They may offer other options prior to allowing you to apply for a short sale. Organizing a short sale package will vary from lender to lender. However, most will request the following:
- Hardship Letter (Sample Text)
- Financial Statement showing proof of income & expenses
- Recent checking, savings and investment statements from all borrowers (2 months statements)
- A Real Estate Listing agreement for the property (Click here to contact a Short Sale Specialist)
- Signed Sales Contract/Purchase Agreement
- Estimated Settlement Statement (HUD-1) provided by Real Estate Agent after you have an accepted offer.
- Proof of buyer's financing (Mortgage Statements)
- Borrower's Authorization (to allow your real estate agent to speak to your lender on your behalf)
- *2 months most recent pay stubs
- *2007/2008 tax returns
- *HOA/Insurance Statement