How to Write a Hardship Letter for Short Selling Your Home
If you are upside-down on your mortgage and must sell your house, a short sale may be your only viable option. A mortgage lender has no contractual obligation to approve a short sale; it must be persuaded to do so. A well-written hardship letter should provide the mortgage lender with the information it needs to justify accepting a loss on your mortgage loan by approving the proposed short sale.
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Instructions
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Explain the reason why your mortgage loan is upside-down. For example, if you live in a location that has experienced an abnormally bad economy, detail that situation in the letter.
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Explain, if you are behind on your monthly mortgage payments, why you are not current with payments.
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Explain why you will soon fall behind or further behind on your monthly mortgage payments. If you have lost a job or an income source or have experienced a reduction in pay, inform the lender that this will affect your future ability to make monthly payments.
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Give details of the short sale for which you plan to apply. Some lenders want a short-sale application submitted with the hardship letter; if not, explain the short-sale scenario so the loss-mitigation employee knows that you have a firm solution ready.
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Explain why you will not be able to pay the "short" amount forgiven by the mortgage lender. This request is critical; some mortgage lenders will approve a short sale but still require the borrower to repay the amount forgiven. Forestall the situation by explaining beforehand that you will not be able to make up the forgiven amount.
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Tips & Warnings
Draft the letter with the understanding that an actual person is going to read and analyze your letter. The loss-mitigation employee who reads your letter is subject to the same emotions and prejudices as you so do not exaggerate or get carried away. Be direct about your financial situation without becoming sappy. Try to stir emotions without appearing dramatic.
Consider writing by hand your hardship letter. A professional, impeccably typed hardship letter may be enough to convince the loss-mitigation employee that you are capable and responsible enough to keep your mortgage payments afloat. Do not appear too intelligent or on top of things, as this could turn against you. Keep the letter short and to the point. If you carry on for too long, with too many personal stories, the loss-mitigation employee may become frustrated and deny your letter for that reason alone.
