What is a Hardship Letter
It is a letter written describing a borrower’s inability to make his or her mortgage payments/loan repayments. It is vital for the letter to include the reasons for the hardship and the future course of action.
In majority of cases, salaried and business class people, over a course of time in their employment or business, go for loan for purchase of either a house, car or invest in machineries, large buildings for business under expansion plan assuming that they would be able to make some savings out of their earnings and use the same to repay the loan taken or money borrowed with interest and during the pendency of such loans, the property against which the loan was taken is subject to mortgage and the lender has a charge or lien on the propriety financed with an understanding that if the borrower fails to pay a part or whole of the amount, the lender has the right to take over the same with the borrower has no legal right to claim even though part of the money borrowed has been repaid. The lender, in turn, has the right to sell the property and recover the unpaid amount which may result in loss or profit.
In such cases, to be legally binding on the lender as well as the borrower, a letter from the borrower to a third party financier explaining the circumstance under which the borrower is unable to repay the money borrowed and seek co-operation to help out the crisis. The third party financier agrees to finance the property on his own terms and conditions and get into an understanding between the original borrower and original lender so that the latter is not affected in any manner whatsoever.