208,078 New Listings - November 2009 - Last update November 20, 2009 12:30 PM EST 
Hardship Letter
Foreclosure can be explained as a state of default where the borrower is unable to pay installments and this leads to the seizure of property by the lender. The seizure involves vacating the property by the homeowner. This is a serious problem for the owners and his family. This disturbs the family life and credibility of the home owner for more than 10 years. After going through a Foreclosure the borrower is termed as a defaulter and is not given credit by other financial institutions for a long period. This seriously impacts the growth of the individual and leads the family in crisis.
The borrowers to avoid the foreclosed homes tries many options which include Loan mitigation, hardship letter and short sale in some cases. In this grave situation the borrower needs help to manage funds and get back on the track for the delinquent payments.
Reasons for Foreclosure
The various reasons for foreclosure may range from unemployment, divorce, death of the borrower, financial crisis and interest rate hike leading to huge payments by the borrower on installments. These reasons can force the borrower to undergo foreclosure and shall impact the credibility for several years. The borrower has to try his best to come out of this situation which is a financial crunch.
Hardship Letter
The Hardship letter is one of the preventive measures being taken by most home owners for avoiding foreclosure on their property. The homeowner writes a letter to the lender mentioning the problems he is facing about paying the installments and the reasons for defaulting in the installments. The letter is read by a Loss Mitigator, who is employed with the lender. The Mitigator on reading the letter and the problems faced by the borrower whether to help him or to proceed with the foreclosure.
The Hardship letter is the most difficult letter to be written by the borrower as he has to describe the problems he is facing and the reason for defaults. It is recommended that the letter should be written clearly and to the point as the Loss Mitigator receives numerous such letters and is interested in reading the main points. The letter should be typed or written carefully so as to be easily read.
Points Discussed and Requested in the Hardship Letter
The hardship letter is a damage prevention activity being done by the borrower and the borrower suggests and requests the lender to work out ways to continue the loan. The borrower may request the lender to:
1. Extend the Loan Period
2. Pardon a Few Installments
3. Provide Time for Paying Installments
4. Helping in Short Sale
5. Reduce the Installment size
6. Lend time to shift the loan to other institutions
All these suggestions are studied and result in the lender providing solution or moving with foreclosure. The final decision is of the lender and the borrower has no right to force implement the letter.
The letter should be addressed carefully and the complete name and information should be provided clearly on the letter mentioning the reasons and problems for defaults in the mortgage payments. The lender can exercise the rights of foreclosure but generally they evaluate a genuine and fraud letter on the basis of the track record of payments of any borrower.
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If you are looking for a loan modification— make sure that your hardship was temporary. If you currently have no ability to pay, the bank will almost certainly deny a modification.