If you're having a financial hardship due to a medical problem, a job loss, or a resetting or recasting loan, you may be considering contacting your bank to ask for a loan modification or other workout solution. When you do this, you'll often be asked to submit a hardship package and a critical piece of that package is the hardship letter. It doesn't need to be a lengthy or complex letter, but it does need to contain a couple essential pieces of information.

Unfortunately, many people get these pieces wrong.

Your bank wants to know two things:

1. What your plan is to fix the fact that you’re behind on payments.
2. Why your plan will work.

Most people are tempted to explain how difficult their lives are in their letter.  They want to explain the circumstances surrounding their situation, which is perfectly natural.  After all, it is called a "hardship letter," right?

Banks aren't in business to feel sympathy for you, though. They have to make a profit to stay in business.  And to make a profit, they need your loan to start performing again.

They want to know your plan to get rid of your past due payments.  Telling them why you're in this position may help you build your case, but they really just want to hear a realistic plan.

Write your letter so they understand your financial hardshipis only temporary.  YOu want to tell them how about the structured and systematic way you're going to catch up on your payments (even if it takes a loan modification or other workout) and not be late again.  You have to convince them that what you're requesting will work for the long term, not just for the next couple months.

Figure out exactly what you can afford to pay them with your current finances.  They need to know that you're willing and able to contribute at least something toward the workout and the arrears that have accumulated.  It shows them you're serious about your obligations and you're thinking practically about solutions that make sense.

The lender's biggest concern is:  will your plan work?  It has to make financial sense for you and for the bank.

Most hardship letters never explain why their plan will be successful.  If they do, their reasoning boils down to their belief in themselves and their hope that their situation is going to improve.

Lenders need cold hard facts, though, so these letters don't get very far. Tell them exactly why your plan will work and give them proof (like pay stubs from a new job or a release to go back to work from your doctor).

If your hardship is that your payment is recasting or resetting, prove to your lender using your current income and expenses that your proposal will work.

Obtaining a loan modification or other workout to save your home is possible.  Especially in today's environment.  But you have to stay focused, positive, and persistent. Tell the bank exactly what you'd like them to help you with.  Then prove to them it will work.

Your letter doesn't need to be fancy or worded like a college professor...it just needs to be truthful, believable, and realistic.