I've been doing short sales since 1998. The hardship letter is one of the most important elements of the short sale approval process.
Why Are Hardship Letters Important?
I've been doing short sales since 1998. I can honestly say that the short sale process has made the biggest change in the real estate industry over anything else. I was looking at a file that I had just the other day. This one was from 2003. The lender asked for three things: a contract, a HUD-1, and a hardship letter. The deal was approved and closed in 60 days from the time I submitted the request to the lender. How crazy is that?
My point here is that the hardship letter is one of the most important elements of the short sale approval process. The banks want to know what's going on with the borrower. They want to know why they're no longer able to make the mortgage payments on the loan. The only way to obtain this information is to have the borrowers write a letter explaining their situation (called the "hardship letter").
How to Write a Good Hardship Letter
The hardship letter should provide a synopsis of the borrowers' recent life. If there has been a loss of employment, it should be included in the letter. Illness in the family? Put it in the letter. Had kids? Lost kids? Death in the family? Loss of hours at work? These are all very legitimate reasons why you may not be able to afford the mortgage payment any longer.
It's very important that the hardship letter provide detailed information to the lender. For example, it's not enough to say, "I lost my job, so I can't afford these payments anymore." While that might certainly be enough for some lenders, it won't be enough for most. A better letter would be an explanation of how long you spent on the job making that salary, and then a summary of when and what happened to cause the loss of income.
It's difficult to share your stories with people, I know. But it's definitely a requirement if you're selling your house in a short sale. It sounds a little messed up, but the sadder your hardship letter is, the better chance you have of getting an approval on your short sale.
Sample Hardship Letter #1
Sample Hardship Letter #2
Sample Hardship Letter #3
Sample Hardship Letter #4
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Reynold Jay from Saginaw, Michigan on February 21, 2011:
You certainly understand the business. The actual letters make this very real. I enjoyed this very much. You have this laid out beautifully and it is easy to understand. Keep up the great HUBS. Up one and USeful. Hey! I'm now your fan! RJ