Learn the best strategies to prove hardship for loan modification and get approved. Find out what documents and evidence you need to show your lender.

- Be prepared to explain fluctuations: Income may vary due to commissions or bonuses. Highlight stable income sources and explain temporary dips. - Gather additional proof if needed: Daycare costs, unexpected car repairs, or student loan payments can be documented with receipts or bills. - Focus on future outlook: Briefly show how your hardship is temporary and your income or expenses will improve (e.g., new job offer, reduced childcare costs).

Last updated on Jun 7, 2024

What are the best strategies to prove hardship for loan modification?

If you are struggling to pay your mortgage due to a financial hardship, you may qualify for a loan modification that can reduce your interest rate, extend your term, or lower your principal balance. However, to get your loan modification approved, you need to prove that your hardship is genuine, temporary, and beyond your control. Here are some of the best strategies to prove hardship for loan modification.

1 Document your income and expenses

The first step to prove hardship is to show your lender how much income you have and how much you spend on your essential living expenses. You will need to provide copies of your pay stubs, bank statements, tax returns, and bills for utilities, insurance, medical, and other necessities. You will also need to fill out a financial worksheet that summarizes your income and expenses and shows your monthly shortfall.

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Anass Maksi

Chief @ BrightStar Protective Services | Security, Risk Management, Axon Taser Master Instructor & Training, Private Investigator, Fugitive Recovery Agent
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- Be prepared to explain fluctuations: Income may vary due to commissions or bonuses. Highlight stable income sources and explain temporary dips. - Gather additional proof if needed: Daycare costs, unexpected car repairs, or student loan payments can be documented with receipts or bills. - Focus on future outlook: Briefly show how your hardship is temporary and your income or expenses will improve (e.g., new job offer, reduced childcare costs).

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2 Write a hardship letter

The second step to prove hardship is to write a hardship letter that explains the cause and duration of your financial difficulty and how a loan modification can help you avoid foreclosure. You should be honest, concise, and specific about your situation and how it has affected your ability to pay your mortgage. You should also express your willingness to cooperate with your lender and your commitment to keep your home.

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Julie White

HFA Client Services Specialist; Customer Success Specialist; Servicing Manager PAHAF, Servicing Specialist Manager, Loss Mitigation, Default, Foreclosure, Senior Mortgage Underwriter, DE, SAR/LAPP
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I agree, but in addition, the hardship letter should also address what steps, if any, have been taken to remediate the reason for default.

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3 Gather supporting evidence

The third step to prove hardship is to gather supporting evidence that corroborates your hardship letter and shows that your hardship is not self-inflicted or permanent. Depending on the nature of your hardship, you may need to provide documents such as divorce decree, death certificate, medical bills, disability letter, unemployment benefits, or reduced hours notice. You should also include any documents that show your efforts to improve your financial situation, such as credit counseling, debt management, or income increase.

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Julie White

HFA Client Services Specialist; Customer Success Specialist; Servicing Manager PAHAF, Servicing Specialist Manager, Loss Mitigation, Default, Foreclosure, Senior Mortgage Underwriter, DE, SAR/LAPP
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Do not recommend providing copies of medical bills that is a HIPAA violation. if the reason for their modification request was reduction of hours at work documentation supporting this should be provided and should substantiate that the reduction ours was not voluntary.

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4 Submit your application package

The fourth step to prove hardship is to submit your application package to your lender or servicer as soon as possible. You should follow the instructions and deadlines provided by your lender or servicer and make sure that your package is complete, accurate, and organized. You should also keep copies of everything you send and track the status of your application. You may need to provide additional information or documents if requested by your lender or servicer.

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5 Communicate with your lender or servicer

The fifth step to prove hardship is to communicate with your lender or servicer throughout the loan modification process. You should respond promptly to any calls, emails, or letters from your lender or servicer and update them on any changes in your financial situation or contact information. You should also ask questions if you are unclear about anything and confirm the terms and conditions of your loan modification if approved.

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6 Seek professional help

The sixth step to prove hardship is to seek professional help if you need assistance with your loan modification application or if you encounter any problems or delays. You can contact a HUD-approved housing counselor, a nonprofit legal aid organization, or a licensed attorney who specializes in loss mitigation. They can help you understand your options, review your documents, negotiate with your lender or servicer, and protect your rights.

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Scott H.

Loss Mitigation/Portfolio Analysis/REO/Vendor Management/Corporate Strategy
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Professional help is fine with a hud approved housing counselor or 3rd party mitigation company…..but Never pay any upfront costs or fees, never let them promise you what they can get the investor of you’re loan to approve (they can’t)…rate, term, principal reduction or partial deferred amount. Every investor is different and you never know what they will or won’t look to do on you’re loan. Finally if this is you’re 3rd, 4th or 5th Modification or you’re current interest rate is 2 to 4% and the term is 480, then sell you’re house….you can’t afford it.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the best strategies to prove hardship for loan modification?

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1 Document your income and expenses

2 Write a hardship letter

3 Gather supporting evidence

4 Submit your application package

5 Communicate with your lender or servicer

6 Seek professional help

7 Here’s what else to consider

Loss Mitigation

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