Sample Loan Modification Cover Letter

The following Sample Cover Letter is just an example of the basic message and information you need to convince the bank to give you a Loan Modification that results in lower monthly payments. You should make any changes that more accurately reflect your situation or use language you feel more comfortable with. Although we recommend that you work with a mortgage broker to help with your Loan Modification, this letter can be used alone or in conjunction with your broker.

Although there are several ways to reduce your monthly payment, the best option for you and the most equitable plan overall is to have your principal loan amount reduced to more accurately reflect the current value of your home. To do that, you need as much detail as possible on the value of your home to convince the bank that you have an underwater mortgage. When combined with your personal financial troubles, you're trying to show the bank that a modification is the best and perhaps only way to avoid foreclosure which is a loss for both sides.

If the bank is unwilling to reduce your principal, they can adjust your interest rate, change the escrow requirements or extend the term of the loan to result in lower payments over a longer period of time. However, continue to press for a principal reduction before agreeing to other terms. Your mortgage broker can also help you by getting comparable sales information to help support your request for a modification.

Once you have your materials together, use this Sample Cover Letter or something similar together with a Financial Hardship Letter and your underwater mortgage information and cross your fingers.

Sample Letter

456 East Avenue

City, State, Zip Code

Re: Property Address: Loan Number:

To Whom It May Concern:

We are the borrowers on the above-referenced loan. As a result of deteriorating economic conditions both personally and nationwide, we've been forced to dramatically alter our plans to avoid financial catastrophe. Accordingly, we need a loan modification to lower our monthly payments and more accurately reflect the actual value of our home. At that time, we'll be able to afford payments for what will no longer be a losing investment.

To support the request for a loan modification, we've attached a "financial hardship" letter summarizing our overall economic condition and how we got there. We've also spoken with several realtors and conducted online research to determine the value of our home. Unfortunately, we've confirmed that our mortgage is significantly underwater and that the amount of the loan is much more than we could ever sell our home for.

In fact our loan is so far underwater that it will likely be years before it regains its prior value. [BRIEFLY EXPLAIN YOUR UNDERWATER MORTGAGE EVIDENCE HERE]

After evaluating all of our foreclosure alternatives, we've concluded that the only way to salvage and protect our financial future is through a loan modification. This option allows us to work together and stay in our home for years to come while avoiding the time and expense of a foreclosure lawsuit for the bank with little or nothing to gain.

Based on the underwater status of our mortgage, reducing the principal amount of our loan would seem to be the fairest way to reduce payments. If necessary, we can look at a combination of reducing the principal and adjusting the interest rate or length of the loan to facilitate reduced payments which is our immediate goal.

As you know, time is of the essence so please contact me as soon as possible to discuss available options and of course let us know if you need any additional information.

Thanks in advance for your anticipated cooperation.

Sincerely,

[HOMEOWNER]

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