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Understanding the Role of Hardship Letters in a Short Sale

Short Sale Attorney

If you are a homeowner finding it difficult to make regular mortgage payments, you may want to consider a short sale for your home. But for executing a short sale, you need to get approval from your lender. The process can be initiated by writing a hardship letter which comprises of details about your reasons of going for a short sale.

What is a Hardship Letter?

A hardship letter is an essential part of documentation when you are making an application or request for a short sale to your lender. The letter provides the lender a clear picture of your current situation and what circumstances led to your financial difficulties. This letter should have sufficient evidence, such as bank statements, a financial statement, tax returns, pay stubs, and any other documentation that can support your case.

The final decision of your lender is influenced by several factors, aside from what reasons you have presented in your hardship, especially their own financial concerns. However, most government short sale programs and lender programs require homeowners to demonstrate their financial hardship in order to explain their inability to make mortgage payments, and why they think a short sale is the most viable option.

What Constitutes as “Hardship”

Hardship is defined as a situation that is beyond an individual’s control, and results in circumstances where a mortgager is unable to afford mortgage payments. There are several situations that may cause hardship and qualify for a short sale consideration by your lender, including, but not limited to:

  • Energy-Environmental costs
  • Excessive obligations
  • Fraud
  • Illness of principal mortgagor or a family member
  • Incarceration
  • Job relocation
  • Military Service
  • Natural disaster
  • Payment adjustment
  • Payment dispute
  • Property problems (construction litigation, roof leaks, etc.)
  • Reduction in monthly income
  • Separation or divorce
  • Servicing problems
  • Transfer of ownership pending
  • Unemployment

 

Important Parts of a Hardship Letter

When writing a hardship letter to your lender, make sure to include the following:

  • Your complete contact information, such as your address, phone number, loan number, and address of the property you want to short sale (if you are living in a different house)
  • A request to your lender in a respectful and polite way, asking them to give approval for a short sale of your home
  • A complete explanation of your current situation and the circumstances leading to the hardship, and also include the timing of the incident
  • Tell the lender what steps you have taken to cope with your situation
  • Acknowledge that your attempts have not worked and the only way for you to keep your home from being foreclosed is to go for a short sale
  • A short paragraph explaining that you have tried your best to make timely payments and that you wanted to keep the property, but due to the circumstances, things have not worked out well for you
  • A sentence or two for thanking the lender for considering your request

 

Lastly, make sure to attach all relevant documentation that can support your hardship and the request for a short sale.

The entire process of getting approval for short sale and executing the short sale is complex and riddled with legal hurdles. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today and let our short sale attorney help with your case.

 

 

By Brian Covert | Posted | Posted in Short Sale Attorneys

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