Purpose

• When contacting your lender, your goal will be to gain a loan modification so that you can afford your mortgage. Loan modifications may come in the form of a lower interest rate, a portion of forgiven debt or a longer period of time to pay back what you owe so far. Other variations of these may be considered by your lender. However, prior to any discussions of a modification, you will complete a packet that includes a hardship letter. Your lender will need to know if you are facing a temporary reduction in income, such as that due to a job loss, or one that is permanent, like a disability. Once your mortgage company can assess your situation, it will know what kind of help you need, if any.
  
  

What to Include

• Call your mortgage lender before you write your hardship letter and establish a contact in the loan modification department. Address your letter to that person. Explain your financial hardship in detail and predict the permanency of your situation. Tell the lender how you have tried to remedy your hardship on your own but that you have been unable to do so thus far. Make it clear that you wish to continue to reside in your home and want to work with the mortgage company to find an equitable solution. If you cannot afford the payments because of an adjusted interest rate, ask for a reduced rate. If you have suffered a loss of income, request that a portion of the loan balance be forgiven. End with a statement that you are open to a resolution offered to you by the lender.
  
  

What to Avoid

• There are some reasons your mortgage company probably will not consider when determining if you should be offered a loan modification. For example, the lender is not concerned with how much the property is currently worth. Since you took out the original amount at a time when the value was more, you are expected to pay back as much as possible. Don't write that you spent more than you made and cannot afford to pay all of your creditors. This makes you look irresponsible, so, regardless of a modification, you may not be able to pay your mortgage anyway. Divorce or other legal issues should be avoided as your lender has no control over them, so they are irrelevant. Do not threaten to file bankruptcy because, if your mortgage company thinks that it won't be paid back at all, there is no point to negotiate a loan modification.
  
  

Alternatives

• If your lender denies your request for a loan modification, you have other options. If your payments are too high and you have equity in the home, you can apply for a refinance from the same mortgage company or a different one. Since your lender will have your hardship packet already, you can request approval for a short sale, where you sell the property for less than what you owe and the balance of the debt is forgiven. A deed in lieu is where you voluntarily give back the house and ask the lender to accept possession of the property. If your desire is to keep the house no matter what, you can request that the lender issue you a forbearance or you can take the drastic step of filing for Chapter 13 bankruptcy. Both may help you set up an affordable repayment plan where you have more time to pay your outstanding debt and you can avoid foreclosure.