When applying for a loan modification under Obama’s new stimulus package ‘Make Home Affordable’ one of the requirements is that you need to explain why you cannot meet your current mortgage repayments i.e. why you are in financial difficulty.
The reason for this is that although your lender is given an incentive by the government in the form of a financial grant, they would much prefer you to continue paying your mortgage at the standard rate and not a new lower rate that will give them less of a profit.
That said if you can convince them that you are genuinely in financial difficulty and are likely to default on repayments or in fact have defaulted then their preference would be that, if you can, you continue to pay back the capital of the loan and that they do get at least some level of interest from you.
In other words they can still make a little profit and avoid the problem of having to take on another house due to foreclosure that they are unlikely to be able to sell at a price that could repay the loan if at all.
So you can see that convincing them that you are in difficulty is crucial for getting accepted into the program. The best chance you have of doing this effectively is to put together a well constructed and clear hardship letter that gives the lender all the information they need in order to consider your application.
There will be times that the lender will provide a form for this purpose and if they do make sure that you fill it in completely, ledgibly and with no spelling mistakes.
An alternative method is to use a hardship letter sample on which to base your application and contains all the information the lender needs.