Can’t afford to make ends meet anymore? The first step in saving your home should be to write a mortgage hardship letter. If your lender doesn’t understand your situation, there's no way they can help you.
While lenders are tough to negotiate with, they will occasionally realize it is in their best interests to let you stay in the house at a lower interest rate or they may end up facing a foreclosure or short sale soon.
After all, if you leave the house, it may be empty for a long time in this economy, and the lender will be making nothing on a vacant house.
So with that in mind, start composing your financial hardship letter and explaining why you can’t continue to pay your mortgage at the current payment schedule.
Start out your hardship letter stating you have done everything in your power in order to pay your mortgage on time, but that you absolutely have no choice but to ask for a renegotiation on your mortgage/interest rate.
Explain your number one priority is to stay in your home and you will do everything you can to work with the bank to make that happen.
Was your setback a temporary one or was it a permanent one resulting from a long term change in your income? Tell the bank that you intend to pay everything you owe, but that it is impossible at the present time.
Let them know If you expect your situation to be temporary and you will eventually be able to return to paying the full amount.
If your setback is permanent, explain what happened and why, and also why you don’t expect it to change.
There are many other reasons which might qualify you for a loan modification. The general rule is the reasons you give need to be financially and emotionally taxing, and out of your control.
At this point, specifically demonstrate that your income is exceeded by your monthly mortgage, utilities, and food bills. Don’t include any frivolous expenses (you can’t afford those anyway, right?).
Close the letter by saying you think a loan modification of the amount requested would benefit you both, and thank the lender for its consideration. Even if you don’t get a modification from the bank, keep trying—sometimes these things take many attempts.