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How to Write a Short Sale Hardship Letter

How to Write a Short Sale Hardship Letter

***The information on this page is intended for informational purposes only and should not be deemed as legal or tax advice. All readers are strongly encouraged to consult a real estate attorney and/or CPA to find out what their options are for writing a hardship letter***

A Hardship Letter for a Short Sale is a letter that you write to your bank or financial institution requesting that the bank consider a short sale to stop the foreclosure of your home.

In the letter you must: 

  • State the legitimate, special circumstances which have caused you to fall behind on your house payments.
  • Explain your current situation and what you are doing to try and get back on your feet.
  • Don’t make your situation worse, by complaining to them.
  • Be honest and represent the facts clearly.

It is important that you put some effort into writing the hardship letter.  A lender will agree to a short sale only when they are convinced that a loss on the property is inevitable.  The lender then weighs the cost/benefit of a short sale versus a foreclosure

To qualify for a short sale, the borrower must demonstrate evidence that the mortgage cannot be paid and that the property cannot be sold for what is owed on the property.  Although short sale applications are assessed on a case by case basis, short sale approval is easier to obtain from a lender if the following conditions exist:

  • The market value of the property has decreased.
  • The borrower has experienced a financial hardship.
  • The mortgage is in default.

What Does The Bank Consider a “Hardship?”

Banks will read the hardship letter to assess why a borrower is having financial difficulties.  What situation triggered the problem?  When did the problem arise?  How has the borrower attempted to cope with the resulting financial difficulties?

The underlying reason behind most delinquent mortgage payments is what the mortgage industry defines as a “hardship condition.”  A hardship is an unexpected financial crisis of some sort.  Although it is the lender who ultimately determines whether a situation will be deemed a “hardship,” HUD guidelines may help determine status.  HUD recognizes the following situations as valid hardships and justification for default:

  • Death of principal mortgagor
  • Death of mortgagor’s family member
  • Illness of principal mortgagor
  • Illness of mortgagor’s family member
  • Marital difficulties
  • Curtailment of income
  • Unemployment
  • Excessive obligations
  • Inability to sell property (this is true for all of Las Vegas)
  • Job Relocation
  • Property problem (roof leaks, construction litigation, etc.)
  • Incarceration
  • Inability to rent property
  • Military Service
  • Casualty loss (such as a Hurricane, etc.)
  • Energy-Environmental costs
  • Servicing problems
  • Payment adjustment (ARM Adjusting)
  • Payment dispute
  • Transfer of ownership pending
  • Fraud
  • Abandonment of property (due to condition of property, for instance)

It is important to keep in mind that some scenarios may meet these criteria and yet not be viewed favorably by a lender.  Additionally, the more proof of the hardship which a borrower is able to produce, the better.

Hardship Analysis

Basically, the two questions a lender asks itself when reviewing a short sale packet are:

1) Is this property going to go into foreclosure? 

2) If this property goes into foreclosure, will we lose less money with a short sale?

Even if the hardship does not completely meet the criteria of a true hardship, the lender may approve the short sale because they believe that the property is going to go into foreclosure regardless.

 NOTE:  As you write the hardship letter, you need to accomplish two goals.  You MUST:

1) Provide as much written explanation of your hardship as possible.  Be specific.

2) Convince the bank that you are unable to make any more payments

 The borrower should write the letter in their own words, but they need to make sure that there is a clear picture of their financial condition, and back up their claims to hardship with documentation, such as pay stubs, medical bills, job layoff letters and more. The numbers should clearly illustrate that the borrower is headed for foreclosure or bankruptcy.  This will motivate the lender to cooperate.

Lenders are all about numbers, so the letter isn’t a sob story about the borrower’s difficulties. It should be a factual description of a financial situation that is leading up to a bankruptcy or a foreclosure on their home, or both. The lender must be convinced that their only other option is foreclosure, and then they can analyze the numbers to see if a short sale is a preferable alternative.

The short sale hardship letter can be typed or handwritten, but we have found that handwritten is most effective. It should contain some standard elements at the top of the letter including the name of the borrower(s), the date, the lender and the loan number. The end of the document should have the borrower’s signature with the date, as well as the signature of any co-borrower. The length is not important so make it as long as needed to have the desired impact.

The hardship letter can help make or break a short sale. While banks care most about dollars and cents, it is important to remember that the package will be reviewed by an individual loss mitigator. Like the rest of us, this loss mitigator is a real person with real emotions who cannot help but be influenced by a sincere story of hardship.

 Sample Hardship Letters:



(Company’s Name)
(Company’s Address)
RE: (home address)
Loan number: (#)

Dear (Ms/Mr. Brown:)

We have purchased our family’s home in (date).

Since then, as you know, our country has experienced one the biggest housing market crashes in history. This, combined with the rising food and gas prices and current slow down in the economy, has affected our ability to pay our bills on time.

Our adjustable interest rate mortgage payment has increased from ($) to ($) since we first purchased the house making it especially hard to keep it current. In the last couple of years our home has lost about (55%) of it’s value making it impossible to refinance it since the equity we once had is now gone.

In the last three months our family’s economic situation has gotten even worse because (explain what caused the financial hardship. Ex: job lay-off, death in the family, medical emergency,…) and we can no longer afford the new payments.

At this point we are trying to avoid foreclosure and/or bankruptcy and would like to discuss with you the possibility of getting a short sale approval that could be beneficial for both parties.

Enclosed, please find copies of the our financial statements. (include documents that offer proof of financial hardship: Copies of any unpaid bills and/or late notices you have received in the last six months. Including: credit cards, car payments,…Past two months of Proof of Income. Including: past two months paycheck/paystubs, social security,… Last quarter’s profit and loss statement if self-employed, past two years of federal income tax returns, past two years W-2’s, and last two months of bank account statements.)

We truly appreciate any effort you can make to help our family through this situation.

I/we, (Home Owner Name/Co-signer Name), state that the information provided above is true and correct to the best of my/our knowledge.


(Home Owner Name)
(Co-signer Name)
(Home Owner Address)
(Account #)

Example Hardship Letter for Short Sale #2:


(Lender Name)
(Loan number)

RE: Hardship Letter – Short Sale for (your address)

Dear Creditor: 

Since last (month) I am experiencing financial difficulties due to (layoff, medical problem).

After having my current financial situation carefully analyzed, I have concluded that it is no longer possible to comply with the original terms of the agreement. I have no choice but ask you for your help on avoiding the foreclosure of my family’s home.

Due to the dropping of home prices that have affect the entire country in the last year, I currently owe more on my mortgage than my home is actually worth.

Please consider allowing me into your Short Sale Program so that we can sell the house quickly before it goes into foreclosure. This will allow me to settle my financial obligation to you and have a chance to get back on my feet, without having to file for bankruptcy.

Please understand that financial hardships can occur and many times it‘s not a choice. I deeply appreciate your help in this matter. If you have any questions, or need anything further from me, you can contact my Realtor, Scott R. Fuller (925)567-6720.

I am enclosing my (last two months bank statements, last two year’s federal tax returns, last two pay stubs for all working borrowers, and my last two year’s W-2’s .

I, (your name), state that the information provided above is true and correct to the best of my knowledge.


(Home Owner Name)
(Account number)

Example Hardship Letter For Short Sale #3:

Lender Name

Loan Number

Today’s Date

RE: Hardship Letter – Short Sale for _____________________ address

To whom it may concern:

I purchased my home at _____________ in ___________. At that time I was employed by _______and business was very good. My salary and the possibility of a promotion and raise made me sure that I could easily support my mortgage. Unfortunately, a downturn in the market caused my company to reduce its workforce and I was laid off.

After searching for a comparable job, I finally got a temporary position as an office assistant as I continuing seeking other work. I struggled for several months to make my mortgage payment, and was also hit with some medical payments that I did not expect (the COBRA payment was more than twice what I was paying when employed). I knew I would have to sell my home to protect my credit rating and possibly have enough cash left over for moving expenses and some savings. I recently put my home up for sale, however, there were several problems that I did not have enough money to fix, such as the broken fence in the back yard and some pretty severe leaks in the roof which indicated a new one was needed.

I really love my house, but I know that I cannot afford it. I am a single parent, working as a temporary employee with few benefits and no savings. My financial situation cannot sustain a home mortgage of nearly $2200 per month. I want to sell the home, avoid foreclosure and salvage my credit. I know that a foreclosure on my record will affect me for years to come. I would ask that you please assist me in avoiding this.

Please accept this offer as payment in full. My attorney has advised me to file bankruptcy, but I prefer to avoid further destruction of my credit. I respectfully request that this short sale be approved, otherwise, I will have no choice but to file bankruptcy for my own protection.  I just want to move on and start over.

I deeply appreciate your help and understanding in this matter. If you have any questions, or need anything further from me, please contact my agent or me personally.

Sincerely, Home Owner Name Address and Contact Information