What is Hardship Letter?
A hardship letter is a written explanation the homeowner gives the lender describing the financial difficulty — job loss, illness, divorce, income drop — that makes the mortgage unaffordable and justifies a short sale or loan workout. It is a required part of most short sale packages. A clear, honest hardship letter helps the lender understand why it should approve a reduced payoff.
Example: A homeowner who lost their job writes a hardship letter explaining the income loss and attaches it to the short sale package so the bank can see the situation is genuine.