By: Zeng Han Jun, CPCG, Singapore

When hard time comes around, it is inevitable that some of us might have difficulties maintaining our current cash flow. This might lead to an increase of the probability that one might fall back on one’s home loan installment payments. What many people should do is to take on a proactive approach to solve the problem and not keep silent about it. One of the most important thing that one should do when one encounter this kind of situation is to immediately contact your lender and explain to them the situation that you are in. Do not use a telephone to communicate with your lender, because the moment you put down that phone, the credit officer on the other line would have forgotten half of what you have just said. Credit officers deal with hundreds of clients in a single day and it is no wonder they can only recall half of what you said. Instead of calling them, why not write them a letter so that everything is in black and white, making it easier for them to refer to. You are the one who are most clear about your situation, so take charge of it and write out your own letter.

It is very important that you write out this piece of letter. When the time comes for the bank to review your loan, it is of utmost importance that they fully understand your situation before committing to any action against you.

It is best if you write your letter in the following format:

Reasons as to why you are requesting for a mortgage restructuring

An effective letter is going to present your personal unique situation across to the bank in a clear manner. You are to bring across the reasons as to why you are seeking a loan modification and why you have fallen back in your mortgage payments. The common reasons are often:

1)Loss of your job
2)A job change
3)A health problem that occurred recently
4)A death that happened recently in your family and etc

It is important to be honest in your letter and not let embarrassment get in the way. It is also important to explain to the lender about your current financial situation . It would normally include:

1)Number of dependents you are supporting
2)Savings left
3)Pay Check
4)Monthly Bills

Terms that you might want to negotiate for in the home loan restructuring

The reason that you want to write this letter is to achieve certain beneficial changes to your home loan. Therefore it is important to include some of these into your letter and it might be the following terms:

1)Conversion of traditional home loan into an interest only housing loan
2)Want your lender to agree on a forbearance agreement with you
3)Allowing a short sell to occur with your property
4)Let a deed in lieu of foreclosure agreement take place between you and your lender

Remember not to lie on your hardship letter and present the truth as it is. The bank’s credit will be able to run a check on your credit profile and if any lie was detected, you run the risk of being a mortgage fraud.

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