Short Sale Hardship Letter: How to Write a Financial Hardship Letter to Your Mortgage Lender

A short sale hardship letter must be written to mortgage lenders when borrowers are seeking approval to sell their home for less than they owe. Banks require borrowers to submit a short sale packet which includes financial documents proving the debtor does not possess the monetary means to become current on their mortgage note.

The short sale hardship letter gives the homeowner an opportunity to explain the events which caused them to fall behind on their house payments. These events should be listed in chronological order with a detailed explanation, along with any actions the borrower has taken to overcome their financial challenges.

Hardship letters should be thorough, yet concise. Lenders are interested to know what caused borrowers to become delinquent; however, the short sale letter should not include every detail of your life. Instead, it should focus solely on events directly related to the mortgage.

The following is a fictional hardship story and provides a general idea of the type of information to include in a short sale hardship letter.

Bob and Mary Smith bought their home in August 2005. Both were employed fulltime, possessed hardy financial portfolios and a well-stocked savings account. In July 2006, Bob suffered a fatal heart attack; leaving Mary a widow and single mother of two teenage children.

In February 2007, Mary's employer announced that they were relocating the business to another state. Employees were given the option to relocate or take severance pay. Mary opted to accept the severance pay because she did not want to move away from her family or uproot her children during the last years of their education.

Mary was unable to find employment for nearly a year. During this time she was forced to sell off the stocks and bonds held in her financial portfolio so she could continue paying her bills.

In March 2008, Mary's eldest son was involved in a motorcycle accident and required three surgeries, along with six months of physical therapy. Mary's son needed private nursing care for four months, which her insurance did not cover. Mary had to quit her job in order to care for her son.

By August 2008, Mary had depleted her savings account and was unable to find suitable fulltime employment. She worked two part-time jobs; however, she did not earn enough to pay all of her monthly expenses and began falling behind on her mortgage.

In November 2008, Mary's mortgage lender initiated foreclosure proceedings. The following month, Mary filed for Chapter 13 bankruptcy in an effort to save her home. She then learned about real estate short sales and contacted her lender seeking approval.

Mary was fortunate that her lender granted approval. She was able to locate a buyer and sold her home for $18,000 less than she owed on her loan. Her lender granted her Payment in Full without Pursuit of Deficiency Judgment; meaning Mary was able to walk away without owing additional money.

Every homeowner facing foreclosure has a story of hardship. Your story is just as important as the next person's. Short sale hardship letters are read by loss mitigator's. Although these individuals do not make the final decision for short sale approval they do have influence and will go to bat for those they believe are experiencing exceptional financial hardship.

It's important to understand bank loss mitigators are overwhelmed with short sale offers. When writing your letter of hardship stick to the facts and keep details concise and to the point. While you want bank mitigators to emphasize with you, you don't want to bore them with unnecessary details and unrelated events.