What is the reason for a hardship letter and is it really an important part of a short sale?
The hardship letter is something that every lender requires for a short sale. I have always advised my clients to be as long or as short as they see fit. However, I have recently discovered that my advice could have been better.
The first thing you need to know about a hardship letter is that the lender will not accept a short sale because of a letter. The opposite however is not true. A lender will possibly reject a short sale because of a hardship letter. I don’t mean to say that a representative will read your hardship and determine that you are not qualified.
However if someone were not able to give a valid reason for a hardship, lenders have in some instances denied short sales (In my experience this has happened less than a handful of times).
Even though the hardship letter is one of if not the least significant aspect of a short sale, you still need to be clear about what has caused you to be in your current situation. For some it is a loss of job, other it is medical, divorce, and many other reasons that cause hardships and subsequent delinquent loans. The hardship letter should be specific to what your hardship is. The more specific you can get the better.
Other important factors that affect most homeowners in today’s economy is the market around your house. A person owns a house but has recently lost their job. This person also finds out that their house which they purchased for 150,000 three years ago would now only sell for 110,000. These scenarios happen all the time and the lender needs to know the whole story.
I used to give advice by saying that the hardship letter could be as short or as long as you would like. However, what I now advise my clients is that the hardship letter should be no more than one page long. The lender does not want to read a four page story about your life. They are more concerned with the numbers of the short sale than the person who needs to sell their house.
Essentially, the hardship letter’s purpose it to serve as a confirmation that you are in fact going through a tough time in your life. The lender needs some kind of proof or explanation as to what you hardship is. Be clear and concise in your hardship letter.
Our last blog entry was about the steps to take to stop a foreclosure.