Stop Foreclosure with Hardship Letter

If you know you will have a difficult time paying your mortgage payment at its current amount, over a long period of time, a hardship letter to stop foreclosure may be required to stall the process of foreclosure of your home. A "hardship letter" to stop foreclosure is one of the first steps in the process of stopping foreclosure of your home. But, there will be additional steps and options to be taken to completely stop foreclosure.

The full process of stopping a foreclosure is a loan modification-the process of getting the terms of your mortgage loan reworked so that you can better manage paying it. Loan modifications used to be reserved for borrowers whose mortgages became delinquent because of job losses, divorce proceedings, or illness, but today they are also open to those individuals who are suffering in the aftermath of adjustable rate mortgages skyrocketing and placing the monthly payment beyond the means of the borrower.

The key to stopping a foreclosure is: knowing when to submit this foreclosure hardship letter and when to submit the other documents that are critical to the process. However, the letter is of utmost importance because it is what ultimately convinces the lender that your situation is truly temporary and that you will pay your mortgage on time from now on if the mortgage terms are modified to facilitate better management of the loan.

In the hardship letter you must be honest and represent the facts of your circumstances clearly. You must show the lender that you had a legitimate reason for falling behind on your payments, that the situation was temporary and that you are now in a position to make your payments on time.

You don't have to be late on your mortgage to request a loan modification. If you are the holder of a subprime mortgage that's getting ready to reset or if you've lost your job but recently got a new job, now would be the time to start working on your loan modification hardship letter. You'd actually stand a better chance of being approved if you aren't late on your mortgage, especially if you still have a decent amount of equity in your home.

The decision to grant or deny a loan modification is not usually made by the actual owner of the loan, which could be a single lender or a group of investors who own pieces of a mortgage-backed security (MBS) collateralized by a pool of loans. In most cases, a company that is under contract to service the loan makes the decision. In making the decision, they are contractually obligated to find the solution that will minimize loss to the loan owner. So, in preparing your paperwork for the loan modification, you have to convince the decision-makers that it would cost less for them to agree to the loan modification than it would to foreclose.

Convincing the loan servicer that it does in the loan owner's best interests to approve the loan modification can get really tricky, and generally requires a great knowledge of lending laws. So, it may be a good idea to hire a real estate lawyer to represent you and handle the writing of the hardship letter and other paperwork needed for the process. The lawyer will know what to say in the hardship letter and the lawyer will also carefully look over your loan papers. Because your attorney has specific experience and knowledge in lending and real estate law, he or she will spot any legal problems with your loan quickly. For example, if there are any Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act (TILA) or predatory lending violations, the attorney will know it and will use this knowledge to your advantage. For example, your lawyer could threaten a recession of the loan or litigate, causing the lender to return ALL fees and interest paid through the loan.

Even if there isn't the lawyer will know just what the lender is looking for in the hardship letter and accompanying paperwork for your loan modification, and you'd stand a much better chance of saving your house from foreclosure.