Loan Modification: How to Write a Hardship Letter

When you request for a Loan Modification from your lender, be prepared to create a loan modification hardship letter to explain your circumstances and the reasons why you cannot afford to pay your present loan.  Your letter is very important -- it is the first thing your lender looks at. You have only one chance of persuading the bank to modify your loan, so make sure that your hardship letter is written well.

Here are some suggestions on how to get your loan modification approved.

Limit your letter to one page -- at most, two. In this day and age where technology drives people to use the computer, simplicity will always be better. Therefore, it's best to send it in a handwritten format. However, if you really have bad penmanship, you can ask someone to write it for you. Only use the computer when you have no options left.

When writing a letter, remember that your objective is to persuade the servicer that a loan modification is necessary for you right now and that it is going to work in your favor. You are not writing it to convince them that you have the right for a loan. Not only does it make you sound arrogant, but you risk making a bad impression.

Be very factual and specific when explaining your current situation right now. Start by telling them your current situation, the reasons why you are struggling to pay your mortgage, the steps you will take to solve the problem, and what you want the servicers to do for you. Then you can tell them directly what kind of payment you need in order to pay your mortgage. Enumerating these in a direct and detailed way will show the servicers that you are thinking practically and realistically about your situation, and that you have a clear idea of what you want. This gives them a good impression of you.

As much as possible, stay free of blaming anyone, and avoid too much sentiment or pity-grabbing.  During a financial crisis, people tend to focus on their own misery and think life is unfair. They become so self-centered that they forget to take action. Remember this: Servicers do not modify loans because they pity you. They modify loans because they are convinced that you are psychologically, financially and emotionally fit to pay your mortgage. Therefore, take full responsibility for your mistakes, express yourself clearly, and articulate your situation and plans with great confidence

Applying for a loan modification is not easy. However, writing a good hardship letter is an effective way to hasten the approval process. Make sure you do yours well.