The 4 M’s of Hardship

The hardship letter is the heart of a short sale packet.  Without it the banks won’t give you much consideration.  There are typically four areas that a hardship falls into: Monetary (job lose), Medical, Marital (divorce), and Military.  There is one more, death, but chances are you won’t be writing that one for yourself.

Monetary

The quickest example is job lose.  Or in this market, a reduction in pay can also be used.  Explain the circumstances of why the salary was reduced or you lost your job and what you have been doing since that happened.  One of my clients lost his job a year ago, did everything he could to find a new one and was able to locate employment in another state.  He had to relocate to take the job.  We showed the banks the documentation of his job lose, let’s from potential employers with bad news and the employment offer from his other job.  The bank understood the circumstances and granted the short sale.

Medical

People get sick, and sometimes they get sick enough to require lots of medical attention and the resulting bills.  And sometimes this will cause one to lose their job (see Monetary).  Again, provide documentation of the medical situation, including a Doctor’s note and the bills as a result of your medical condition.  I know of one case where a home owner was diagnosed with a terminal brain cancer and only had 6 months to live.  He wanted to liquidate everything so he wouldn’t burden his family with his stuff.  The banks again reviewed and accepted.

Marital

During these trying times, it puts extra burden on relationships.  Sometimes that will lead to a divorce and these cases are harder for the bank to review.  Providing court documents and proof that one or the other person cannot handle the mortgage is the best method with the bank.

Military

Let’s face it, we’re on two fronts right now, and if you are in the military and deployed, your not making the same as you would if you were home doing a civilian job.  It’s much easier to go to the bank with your deployment orders, previous salary and military salary and explain it just doesn’t work.

Transparency

The name of the game is Transparency, give the bank everything so they won’t feel like you are hiding anything.  They won’t spend a lot of time asking for more documents or investigating on their own.  I know one package that exceed 450 pages and the owners said they were apprehensive, they put their entire lives in the 450 pages, every detail of their financial lives and they were scared.  It’s a scary process and one that you shouldn’t come to without lots of thought and consideration.  Contact an attorney, tax advisor, financial advisor and even a credit advisory until you feel like you have all the details to make the right decision.

Related posts:

1. Let’s find a house and then talk to the bank….
2. To Short Sale or not to Short Sale…