Des Moines, Iowa: 

One piece of the loan modification ,refinancing application or short sale attempt  that homeowners typically get wrong is the hardship letter. Every lender that is considering giving the borrowers an option to escape the foreclosure process will require a detailed letter explaining what initially caused the missing of monthly payments, as well as what actions have been taken to solve the problem.

Many homeowners, though, write very short hardship letters that explain almost nothing about what happened, what has been done to correct the situation, and why the financial crisis was only temporary in nature. In reading dozens of these letters over the years, it seems that many borrowers do not understand what to include when writing the bank.

The most important part of the letter is the description of what happened to cause the crisis. This should be as detailed as possible, because lenders will want to make sure that it was an actual hardship that caused the borrowers to fall behind in payments. Something like a layoff or huge medical expense will be given more credibility than a sick cat or broken TV that was replaced.

Proof in the form of documentation should be included to support the description of the hardship. Letters detailing the layoff or copies of actual medical expenses can be faxed to the bank with the hardship letter to show the severity of the problem. Proof should also be included of any solutions to the crisis, such as pay stubs from a new job.

It is also vital that homeowners include dates and time frames during which aspects of the situation occurred. Banks do not want vague descriptions of losing a job and then finding one. They want to know what month the hardship happened, then what was done in the meantime while payments were being missed, then when exactly a new job was started.

Finally, homeowners should include a specific call to action that they want their bank to take. Whether it is modifying a mortgage or accepting a deed in lieu of foreclosure or doing a short sale, unless the bank knows exactly what the borrowers want, they may not know what to do with the workout application. Being clear about their intentions with the home is the best way for owners to communicate with lenders.

The hardship letter is a vital piece of the package of documents that lenders require before negotiating with homeowners. Homeowners should take the opportunity to explain what happened to cause them to fall behind in as much detail as possible. This is their chance to explain that they are not deadbeats and deserve a second chance to keep their home.