Step 2 - Create your hardship letter
Step 3 - Apply for loan modification
A loan modification hardship letter is submitted to your lender, with various other attachments, to explain the reason(s) why you have fallen behind on your payments, or are struggling to make your payments. This letter should cite real-life reasons why you are facing hardship. The reasons may vary from loss of income, reduction in income, or other financial stressors like health complications, divorce, unexpected expenses, etc. In requesting a loan modification, you are requesting that your lender work out a modified mortgage payment plan. This can include locking your payment in at a lower monthly rate or a fixed interest rate (as opposed to an adjustable rate). Sometimes, this loan modification request can also be made for second loans (or home equity line of credit loans). More and more loan modification requests are being granted these days. The upside of a loan modification hardship letter is that often lenders are willing to keep homeowners in their homes if they have shown signs of financial improvement, or if they have had strong payment history up until they fell on tough financial times. Lenders also look positively on homeowners who have tried various options, like selling personal items, or strictly reducing their budgets, for example, in order to keep their homes.