How Do You Write a Derogatory Credit Letter for a Mortgage?

A letter of explanation for derogatory items on a credit report should explain the circumstances that caused any late payments and why future late payments will not occur, according to Guston Cho Associates. Writers should make the letter concise and only address the items the mortgage underwriter would like clarified.

The letter writer should explain exactly what led to each financial issue in a few paragraphs using business letter formatting. The mortgage applicant needs to identify each credit issue with the date it occurred, the financial institution affected and the last four digits of any applicable account numbers, states Loan Officer Lately.

If a job layoff, accident, loss of business, medical condition or other circumstance was to blame, the writer needs to include supporting documentation, such as copies of hospital bills, statements from employers or accident reports, states Guston Cho Associates. The letter writer should also include the specific dates of when these problems occurred.

After the mortgage applicant completes the letter, the loan officer will review it for content and suggest any necessary changes before sending it to the underwriter, according to Guston Cho Associates. Bankruptcy, short sales, foreclosures or a period of late payments will all trigger a letter of explanation request from a mortgage underwriter.