In most cases, a hardship letter is written as part of the paperwork to conduct short sale or loan modification. For these, the letter explains why the homeowner is making a request for a loan modification or needs to short sale the property.
Other uses of a hardship letter include:
- Requesting relief for being behind on your mortgage or credit card.
- Requesting a reduction in education fees (college, university, private school, etc.).
- Requesting a reduction in hospital bills or insurance costs because of an unexpected, unusual medical procedure or treatment.
The bank or creditor doesn’t want to see you walk away for your debt, especially if you have a reasonable hardship.
A hardship letter is a summary of what happened that caused the current situation, what the homeowner has done to correct it, and what the homeowner hopes to accomplish with the lender’s or creditor’s help.
A hardship is not based solely on financial matters. Anything that makes it difficult for you to continue making a payment might qualify you for a hardship. These include:
- Reduced income (furloughs, new job, partner’s loss of job, pay cut)
- Illness or medical emergency
- Job transfer (voluntary or involuntary)
- Divorce, separation or marital difficulties
- Exotic mortgage terms (an adjustable-rate loan)
- Military service
- Death in the family
- Increased expenses and excessive debt
- Unexpected repairs or home maintenance