Short Sale Hardship Letter: Tips For Writing A Letter Of Hardship To Your Bank

A short sale hardship letter must be provided to mortgage lenders when borrowers engage in short sale transactions. When banks enter into shorts sales they agree to accept less than the borrower owes, as long as the borrower can sell their home within a certain time period.

The short sale hardship letter is used to provide details of the events which caused the borrower to become delinquent on their mortgage. Lenders require borrowers to submit financial documentation proving they are unable to cure mortgage arrears and have no choice but to sell the house short or fall into foreclosure.

Short sale letters should include a timeline of events and explanation of actions the borrower has taken to resolve financial challenges. The letter of hardship should be thorough, yet concise. While lenders can be sympathetic to your plight, they aren't interested in knowing every detail of your life.

The following is a fictional hardship story which provides an overview of the type of information to include in a letter of hardship.

John and Jane Jones purchased their home in June 2004. At the time John and Jane were employed fulltime, held financial portfolios and a well-stocked savings account. In May 2005, John was involved in a motorcycle accident and required multiple surgeries and months of physical therapy.

John was unable to return to work on a fulltime basis for three years. Although he received disability payments, the amount he received barely covered the private nurses John required the first year of his recovery. The couple had to tap into their savings account to meet their monthly obligations.

In July 2007, Jane's employer of ten years suffered a fatal heart attack. Unable to continue operations on her own, his wife sold the business and Jane lost her job and their health insurance. In order to pay for John's therapy, the couple liquidated their financial holdings.

In September 2007, Jane was diagnosed with breast cancer. Although it was caught early, the Jones' did not have health insurance and the treatments quickly depleted their savings account. Fortunately, Jane only had to endure one round of chemotherapy and a relatively minor surgery. She was able to return to work within three months.

With years of financial setbacks, the Jones' began falling behind on their mortgage payments. Within a matter of months they were forced into bankruptcy. They filed for Chapter 13 protection and reorganized their debt. They were able to adhere to their repayment plan and then the bottom fell out.

In November 2008, Jane's cancer returned. Although they had health insurance, Jane's treatments were much more aggressive and she was unable to work. The Jones' missed two of their Chapter 13 payments and their lender petitioned the court to have their bankruptcy dismissed.

The lender's attorney made a court appearance and after hearing their story, offered to allow them the option of a short sale. Although the Jones' wouldn't be able to stay in their home, they would be able to walk away owing nothing.

Every person facing foreclosure has a hardship story. Your story is just as important as the next person's. Hardship letters are read by loss mitigator's. Although loss mitigators do not make the final decision on a short sale they can have substantial influence and will root for those they believe are experiencing serious financial hardship.

Keep in mind loss mitigators are bombarded with short sale offers. When writing your short sale hardship letter stick to the facts and avoid portraying yourself as a 'victim'. While you want bank mitigators to empathize with you, you don't want them falling asleep while reading your letter of hardship.