Preforeclosures Blog
Importance of hardship letter in preforeclosure
Hardship letter is a must in pre-foreclosure procedure explaining reasons of distress and financial difficulties of homeowner. It justifies why bank should agree to get paid in an amount less than what homeowner owes.
Hardship may be due to:
- a divorce, making mortgage payment difficult due to separation and increased expenses
- medical conditions that medical bills exceed financial means or prevent homeowner from making previous level of income
- homeowner files bankruptcy
As a real estate investor you need to work with homeowner to prepare proof needed for each case, that is, divorce decree, medical reports and bills, etc.
Homeowner prepares the hardship letter to clearly state that he/she cannot afford to keep the property. Bank must be satisfied that short sale is the sole option to solve the problem. Bank (loss mitigation department) knows that recovering its funds will be much more difficult if homeowner files bankruptcy and stays in the property for couple of years without paying. So, preforeclosure short sale is the answer.
Preforeclosure short sale by getting hardship letter is different than loan modification and forbearance agreement. Homeowner does not want to stay in the property after presenting hardship letter while in loan modification and forbearance agreement, homeowner intends to stay in the property. On the other hand, you may need hardship letter for loan modification or workout.
Ask homeowner to contact loss mitigators of the bank after preparing a detailed hardship letter. Otherwise, it will be difficult to reverse the bank’s decision of non-acceptance. Personal contact is very important especially at this time of financial crisis as loss mitigation department receives so many letters.
Posted: November 5, 2008 ...................................Post a comment
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