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[Music] hello guys today we are going to talk a little bit about your hardship letter so when you're applying for a loan modification you really want to think about what the purpose behind your hardship letter is as opposed to if you are applying for either a deed in lieu or a short sale the purpose is kind of different so generally understanding what you're trying to convey with your hardship letter is important when you're applying for a loan modification or a repayment plan or something to keep the home you're trying to let the bank know that while you underwent financial hardship you since then have recovered you're in a good financial position now if you're applying for something to get out of your debt like a short sale or a deed in lieu or something where you're trying to get the lender to agree to just let you out you want to make your financial hardship sound like you have not recovered at all and that the mortgage payments are very unaffordable so before you actually sit down to write your hardship letter ask yourself what am i trying to do if you're trying to stay making your hardship letter sound as if you have this disastrous ongoing financial hardship that is not resolved is not the way to go if you're trying to get the bank to agree to settle a debt deficiency you want to make your financial hardship sound as long and as ongoing as possible so there are five main common financial hardships that banks recognize as reasons for default and we're just going to kind of walk through those the first of the five is job loss this is the most common reason people fall behind on default and it's also the most cut and dry so if you're someone who after you listen to this video realizes that you have multiple hardships going on like multiple of the five we're going to talk about but you did suffer a job loss in some way that caused you to default on your mortgage you want to choose job loss as the hardship reason to focus on the reason being it's really easy to demonstrate you know you were working you had pay stubs and then at a certain point your employer gave you a termination letter or you were laid off or they you know couldn't keep you on anymore and it's pretty easy to prove um it's also just a very valid reason as to why you were able to make a payment and then you weren't so job loss is the most common one and it's a good one to use um in the event you have multiple going on and you feel like you kind of need to simplify and pick one pick job loss what's important to understand about job loss too is even if you were fired that still counts as job loss sometimes i think uh homeowners feel hesitant to tell the banks that they were fired but you shouldn't you should just use the phrase laid off and let them know that you lost their job the banks are really just looking to make sure that the financial hardship you underwent is genuine and genuinely being let go from your job is a valid reason for you to have defaulted on your mortgage so the first one is job loss the second one is divorce or separation of a borrower so you know if you're married and then you go through a divorce the household income is usually split in half and then you know borrowers have to face trying to make all of their monthly bills often on their own um that is a that is a valid reason for hardship if you are in a situation where you are on your way to divorce which would be separated but you don't have a valid divorce going yet you have to explain that to the bank you use the word separation and it's worth it to tell them in the hardship letter that you are you know intending to move forward to a divorce so even if you aren't formally divorced but there are two households and you're separate and you know you're on the path if you're in the process of applying for a loan modification that counts as a hardship reason but you might have to explain a little bit that while the divorce isn't legal you're on the path to separation um death of a borrower of course if somebody's alive they're paying their mortgage if somebody passes away they can't pay their mortgage anymore so death of a borrower is a completely valid hardship reason what you'll want to attach to the back of your hardship letter is the borrower's death certificate so this situation applies usually when there's you know a married couple or a couple that's together one of them passes away the surviving borrower on the loan then falls into default and needs some sort of assistance that would count as death of a borrower if you're applying for some sort of short sale or deed in lieu as the personal representative of an estate your hardship reason will be death of the borrower you should be able to present the probate documents that give you the legal authority to ask for the short sale and so in the hardship letter you just write the borrower passed away that caused the hardship here's the proof you attach the death certificate and whatever probate documents you have to um show the bank that you have the legal right to be working on the property okay so our so we've got job loss divorce separation death of a borrower our fourth hardship reason is illness of a borrower so the first thing to note here is that banks will accept a broad interpretation of illness so illness just doesn't just mean some physical medical illness if you are undergoing mental illness that requires expensive treatment or has in some way impacted your ability to bring in income it's important for you to understand that the way you explain illness will help you get through the financial hardship verification process and i personally have you know had several clients where mental illness is a real thing that affects the household income and it should be counted here but you will have to maybe get into some of the personal details that you maybe don't want to share with others but depression anxiety ptsd these are things we see coming through and they they do count as illness of borrower obviously there are more straightforward illnesses where you know if you're if you're sick and you go to the hospital or you receive um you know maybe a cancer diagnosis or you break a bone or you injure yourself in a way where you both have medical bills and can't immediately go back to work that also counts illness of the borrower often sometimes can get expanded also to illness of someone else in the household they don't call it illness of someone in the household but you can expand the illness hardship reason to someone else so if you're a parent and you have a child who becomes sick and suddenly expenses are high or they require time that takes away from your time of working or if you have an elderly parent that suddenly becomes sick and requires a ton of attention you're going to want to explain how this illness relates to the financial hardship in your letter and you use it under this illness of borrower financial hardship label the fifth reason uh banks offer as a valid financial hardship reason is what they call unforeseen financial or unforeseen increased expenses um what that means is something has popped up that you weren't expecting that caused you know prioritization of income to be diverted to these unforeseen expenses i'm going to say right now this is the worst one to use when you're trying to get your hardship letter through the financial verification process so don't mention unforeseen household expenses if you can fit your financial hardship into any of the other five we discussed because it's subjective right and banks have the ability to kind of like review what you're saying the unforeseen expenses are and decide whether it was valid for you to worry about those instead of your mortgage and so you don't want to put yourself in a position where you're kind of leaving yourself up to what the banks want to decide or what the banks you know think is valid so i always with my clients i tell them don't talk about unforeseen expenses or increased expenses unless we have there's nothing else there's no job loss there's no illness there's no death there's no divorce if you don't have any of those things then you probably will have a valid financial hardship reason around unforeseen expenses um i think it's i think it's also worth mentioning that there are some unforeseen expenses that banks view as very valid reasons to default and some that kind of are less valid and so i'm just going to quickly run through if you're going to use this unforeseen financial hardship expense reason i'm going to run through the what you want to phrase it as and the ones that seem valid um so home repairs or costs that affect the habitability of the home so roof is roofs collapsing is a common one i see or suddenly there's a big foundation issue or black mold anything going on with home repairs that make it so if you don't prioritize fixing that your home will become not habitable that's a great unforeseen increased expense to say cause the financial hardship if you have a family member or a personal you know medical injury or emergency sometimes people suddenly have you know a family emergency on the other side of the country that they have to suddenly fly to and stay for a couple weeks and pay for lodging things like that where somebody's actually having an emergency is a good one less per se less persuasive unforeseen increased expenses are going to be kind of smaller expenses that banks might think would be reasonable for you to be prepared for so things that i've seen banks not like in the past have been like car repairs or you know smaller increase spending like suddenly having to purchase something you know under 500. any sort of entertainment costs you want to not talk about that any sort of shopping or eating out or anything that will constitute discretionary spending might cause you to have more questions asked about your financial hardship so use one of the other four financial hardship reasons if you can if you can slot your financial hardship into one of those that should be your financial hardship if you are forced to use unforeseen increased expenses as your financial hardship reason make sure that you are thinking through how you're going to explain them so you don't end up in a position where the banks want to ask more questions or they have some sort of issue with where you're spending your money for homeowners in washington if you need help kind of talking through how to draft your hardship letter or how to kind of put all of your hardship information together give me a call there's going to be a couple more videos about the hardship letter a couple more things to watch so if you are watching this and you know you're going to write your hardship letter and this was helpful make sure you watch the other couple videos too so you write a perfect hardship letter thanks