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In this video tutorial, the speaker discusses the significance of a hardship letter when applying for loan modifications, short sales, or deeds in lieu. For a loan modification, the hardship letter should convey that although financial difficulties were experienced, the applicant has since recovered and is now in a stable financial position. In contrast, when pursuing a short sale or deed in lieu, the letter should emphasize the ongoing financial hardship and the unaffordability of mortgage payments. Understanding these contrasting objectives is crucial for effectively communicating with the lender.