Examples of Hardship Letters for Deed in Lieu of Foreclosure
Mortgage relief comes in many forms, and getting relief from a lender can help avert a home foreclosure. But before a lender considers providing help, such as allowing a deed in lieu, it needs to review a hardship letter. Take a look at the purpose of a hardship letter and how a deed in lieu works before approaching your lender for assistance.
Other People Are Reading
-
Understanding a Deed In Lieu
-
A deed in lieu of foreclosure is when you decide to give up ownership of your property to decrease the likelihood of a mortgage foreclosure. A deed in lieu is a last resort effort to fight a mortgage foreclosure, and lenders typically only consider this if foreclosure is imminent. The mortgage lender takes back the deed and cancels the mortgage debt and you can walk away from the home.
Purpose of a Hardship Letter
-
Before agreeing to a deed in lieu of foreclosure, mortgage lenders consider whether there's truly a financial need. Some borrowers can afford their mortgage payment but request a deed in lieu because they want to give up rights and liability to the property. Maybe they owe more than the home's worth and are eager to sell. A hardship letter helps weed out people who don't need mortgage relief because borrowers must disclose particulars about their financial standing and the reason for the request.
-
Example of Hardship Letter
-
Every hardship letter includes similar elements to help a mortgage lender decide if a borrower needs relief. For example, hardship letters must begin with the names of borrowers on the loan, the address of the property, lender's name and account number for the loan. Borrowers should begin the letter by stating their reason for writing, which is to acquire a deed-in-lieu to avoid a home foreclosure. Borrowers can include a list of efforts made to avoid the situation, which demonstrates a proactive approach. In the case of a deed in lieu, borrowers can indicate the number of months the house was listed with a Realtor. Borrowers must expound on the reason for mortgage trouble. Was there a job loss, divorce, death or other issue that prevented payments?
Considerations
-
A deed in lieu approval can relieve mortgage debt, but it also harms credit scores. Borrowers who walk away from the mortgage experience a drop in credit scoring, and this drop can halt any loan applications in the near future. The damage isn't long-lasting, and, as long as borrowers continue to pay other creditors on time and maintain a low debt load, they can recover and apply for new financing after two years.
-
