Writing the Hardship Letter
Today I want to talk about a small but important piece of the short sale – the hardship letter.
This is the one time you really need to look at the situation through bank’s eyes. They have taken all the risk and ultimately deciding if the transaction is going to go through. The hardship letter needs to be very compelling and very descriptive at explaining the situation why the borrower has defaulted on their loan. Now descriptive doesn’t mean write a novel it means give dates, reasons, and really try and play to the emotions of the bank… as if a bank has emotions right?
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Take the lender through the process of the Why, What, How, and Future of the problem.
The Why is where you explain why the borrower defaulted on the loan. If they defaulted because of something of a more serious nature the better of you are. Here are just a few of the reasons why.
- Death
- Divorce
- Illness
- Job Loss
- Job Transfer
Always be honest and don’t make anything up just to try and win them over.
Ok so writing a hardship letter isn't like writing a letter to Santa, but they do have one thing in common -- DETAILS!
The What is what exactly happened to cause the default and when it happened. Give dates of when it happened so you can paint a picture of the steps to their default. Every foreclosure happens from a chain of events so give them those juicy details.
The How are the things they did to try and correct the problem before they went delinquent. This could be selling off stuff, getting extra jobs, or putting up the home for sale to avoid the dreaded foreclosure.
And last is the Future of the problem. The bank is going to ask if this is a temporary problem or something that will have lasting effects where a short sale is necessary. In cases of serious illness, death, or divorce this will often weigh heavier because it’s more of a permanent situation and the bank will look at it from that perspective.
Sometimes a person is able to get back on their feet and find a new job or change their situation and selling the home isn’t the best option. This is where a loan modification comes into play.
There are so many pieces to a good short sale package but you’ll always want to make sure you present a solid, thought out and well orchestrated hardship letter. Keep it under 2 pages and ideally on 1 page. It’s also a great idea to hand write this letter and sign it at the bottom. Be kind, courteous, and ask for their compassion.
Even though you feel like a case number when you talk with the bank just remember and actual human will read over this letter and they will present it to a group of decision makers.
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