looking guidence on writing a letter for reason of BK to a mortgage bank

[getback]

Does anyone have any tips or where I can find an example of this letter to lenders explaining your BK? I swear I saw examples here.

Thanks

[frogger]

"Explaining" your bk to a lender??? Nothing to explain. It is what it is........

[dneil]

I would probably start out with identifying the years of credit and payment history. The financial hardship that occurred (job loss...health, economic disaster the US is in) which led to your bankruptcy and what you have learned and done different and how you no longer present a risk because of what you have learned.

Hope that helps

[Scooter10]

Does anyone have any tips or where I can find an example of this letter to lenders explaining your BK? I swear I saw examples here.

Thanks

I would talk to your lender and see what they are specifically looking for.

I did one recently and talked about what happened, why (overspent, our our work for 6 months, overall status of econonmy with property values dropping, credit crunch....) then what you have learned (i will never put my self in a potision like this again, i am scared of credit, i made poor financial decisions) and a reassurance that it will not happen again.

The reason I say ask your lender is because some may want more of an explanation about what happened in why, but in other lenders may not care what happened they just want to be reassured that it will not happen again. This will help craft your letter.

[Logan]

I would keep it simple and to the point. I divorced and could no longer handle the debts alone. I lost my job and could no longer pay my debts.
A bit more specific but don't tell too much since they can ask for more if they want more.

[frogger]

I would keep it simple and to the point. I divorced and could no longer handle the debts alone. I lost my job and could no longer pay my debts.
A bit more specific but don't tell too much since they can ask for more if they want more.

And everything that you put in writing goes in your file that never goes away. It's bad enough to say much, but to place something in print? That could very well be the gift that keeps giving. Anything you write can and will be used against you at some point.

Once again, it is what it is. Credit reports tell much more than anything you can say.

[Pandora]

You can add a statement to your credit report - keep it short, sweet and not too descriptive - like "BK filing due to job loss" "BK filing due to medical debt" etc... something quick and easy. You can take it off of your credit report at any time.

I agree with Frogger - I would not put it in my potential HR file as when you leave and use them as a reference, it can be forwarded to another potential employer.

[JackBondLove]

I plan on saying, "underpayment of insurance for home destroyed in natural disaster, followed by extraordinary contraction of business due to severe general business recession and cumulative effects of loss of business opportunities due to offshoring of work in my field to lower wage countries, from 2005-2010" Of course, I plan to only use retirement money to qualify for anything.

[no_it_all]

Does anyone have any tips or where I can find an example of this letter to lenders explaining your BK? I swear I saw examples here.

Thanks

I had to do the same exact thing. My letter was sweet and to the point: My monthly debts and living expenses where higher than my monthly income. I sent it in and a few days later I was told it was "unacceptable". I then added a bunch of weepy dreary stuff about my divorce and it flew. I had no idea a human actually read these dumb letters.

[mountanddo]

I guess I don't understand this. You already had to face a BK. Now you have to grovel and tell your whole sad story to your lenders too? Anyone can say anything about why they had to file BK. They want to make sure it doesn't happen again but what if it does? Then what? Is one BK really "better" than another? The result is the same.

[LoveBubble5]

I have read about these kinds of letters that new mortgage carriers might want. I have a unique story that starts long before we bought our house...

1.) First pregnancy we suffered a miscarriage... ok, not unusual or heartbreaking, but it gets better (or worse).
2.) Second pregnancy we lost the baby at six months, autopsy inconclusive (I don't engage in risky behavior, drink, do drugs, ect.)
3.) Third pregnancy produced our son, seven weeks early because I developed HELLPS.
4.) When my son wasn't quite three months old, I suffered a stroke.
THEN... we decided we didn't want to raise our children in an apartment, so I looked into it and...
5.) closed on a not-so-stellar house but the price was within my preapproval rate- planned on fixing the problems my house came with soon after we moved it... however....
6.) After living in the house less than a year, fourth pregnancy produced our first daughter without incident.
7.) Decided I was grateful for what we already had, still not having lived in the house full year, we considered my health in the long run, and went forward with tubal ligation at the age of 24
8.) Three weeks after tubal ligation surgery, discovered I was pregnant with our third and last child (was pregnant at time of surgery but did not know). My girls are ten months apart in age, and in the same grade.

I make pretty decent money where I work, but at the time 65% of my income came from tips (now, probably about 35-50% comes from tips), and my disability pay was based on a percentage of my base wages. In order to have disability leaves, we had to carefully plan finances so our bills would get paid.

9.) When I was five months pregnant, SO lost his good-paying job... times were so bad that our utilities got turned off during my maternity leave.

BUT WAIT... things turned up slightly. SO found another job six months after losing the good paying one, and after third child was born, at only a couple dollars less than what he had been earning. (I think I might stop using numbers now).

Things went gloriously well for awhile, or so I thought in my ignorant bliss, because when SO lost his first job I stopped paying CC's, as well as medical bills because we just could not afford to pay on them... so in retrospect, even then with two decent jobs we were not able to afford the house note as well as all other necessary bills (because I guess I just didn't consider medical bills necessary?). I know now that I bought a house well outside of my means, and I wonder why the heck the stupid loan officer allowed it... or whoever it was that approved on it.

I had been advised around 2006 to do a BK, but wanted to wait until all the medical bills came in from the birth of our third child. Then I procrastinated, because even though a few of my major bills had gone to judgements, there were no wage garnishments in effect (I work for a tribal owned business and the creditors would have had to go through tribal court in order to get my wages garnished, unless of course I voluntarily agreed and signed off on the garnishments, which I'm not THAT stupid, so I did not). I finally retained a BK lawyer in 2008 for $500, and still procrastinated.

Then last year when I went to renew my license to work, backgrounds said no because of what the circuit court was showing. I was told I had to submit to the backgrounds director, in writing, a proposed payment plan as to how I was going about paying this debt off. I simply explained that I did not have the money to do, that I had retained a BK lawyer, and that I was working on it (I handle a LOT of money at work, so my employer was concerned about my debt). They told me they wouldn't renew my license until after I had proven that my BK was filed. At that point in time I had no choice but to file the BK... even after all that was done, backgrounds still wanted me to write a statement as to how I got into my financial debt. I personally thought it was stupid and none of their business, but if I didn't do it I wouldn't get my license- they're "not saying [I] can't be employed, just that [I] can't get my license unless [I] do this." Well duh, I can't work without my license, so does that mean it would go down as me resigning? Either way, I needed my job so I did what they asked.

At around the same time I filed my BK, my SO was laid off from the nice job he had, so we were again out of one income.

At first I made due with the bills by using some of my student loans, and we also had SO's unemployment benefits. I keep meticulous track of what we spend and what it's spent on, ect. and I wonder now how in the world we made it through this past year financially. However, there was never a month where we were absolutely on time with everything- I'd skip an internet payment or phone payment (things that don't show on my credit report), and then play catch-up next month. A lot of times we did checking advances to pay the bills, and in my mind I kept thinking we're able to pay all of our bills because we're able to pay the fees with the cash advances... but in essence, all I was doing was barely making it one month, and then making it with less the next month so that we could pay back the checking advance. It was a terrible cycle... and one little emergency would cost us anyway.

I never waited for an emergency. At the end of October when once again I couldn't buy enough food for us and the food pantry wasn't giving us enough, I told SO I did not want to do another check advance. I had already tried to get a mod and was told no, or that once I reaffirm they'll do it (was told elsewhere my bank lies). So I didn't pay October's mortgage.

SO finally got a job this month, and it pays less than unemployment benefits, so we'd be drowning anyway. I stopped before an emergency, because that's all it would have taken was one little emergency to put us in the position we're in now anyway, except that right now we have (and will accumulate more) money than we did before.

So, to wrap this up, I don't know how else to explain my story should I do so when applying for a future mortgage. Do I include the pre-mortgage events, because those are pretty unique circumstances that might encourage sympathy. Do I simply say one of us lost a job (even though the "one of us" isn't named in the title to the property... oh yeah, that's another thing, we're not legally married... we have three kids together and have been together ten years. Does that make a difference? Or does not being married mean anything at all anymore?) Do I say my income, due to tips, has also gone down over the last five years?

I don't even know what to include or not to include... anytime I want something, I've been encouraged to pull the "stoke card." Btw, I had the stroke when I was 23.

[tobee43]

really no letter is required at all...the notice from the bk courts notifying the bank of one's bk says it all. one need not explain anything. i so agree with frogger on this...never put it in writing it can come back to bite you back in the future.

[BobMango]

Saying not to write the letter is really not helpful. Many underwriters require them. The best way to approach this is to remember the three r's: reason, remorse, and response (or what you are doing to prevent a future issue). Keep it simple and short but make sure you focus on those three r's.

[tobee43]

Saying not to write the letter is really not helpful. Many underwriters require them. The best way to approach this is to remember the three r's: reason, remorse, and response (or what you are doing to prevent a future issue). Keep it simple and short but make sure you focus on those three r's.

bob, i'll have to agree to disagree with you on this one. these lenders have no right to ask why you are filing UNLESS you have decided to reaffirm your mortgage, which we all know by now is not the best move one can make.

the notification from the court would seemingly be enough information for the lenders to know that one is qualifying for some type of relief from the court financially.

so maybe i'm missing something here, however, my take, and i could and have been wrong before, is that the OP is asking what to put in a letter to the lender about their bk....UNLESS they are applying for a loan from that lender????, which i was under the impression it was for an existing mortgage included in the bk. i could understand that an underwriter would of course what an explanation of a bk if one is applying for a "new" loan.

[LadyInTheRed]

UNLESS they are applying for a loan from that lender????... i could understand that an underwriter would of course what an explanation of a bk if one is applying for a "new" loan

I think that is what is going on here. An application for a new loan.

ETA: Based on another thread, the OP is in Chap 13 and applying for a new mortgage.