Why does the lender need this?

What does the mortgage lender want with a letter of explanation of late payments? I bounced a check which in turn made my mortgage payment late. I am refinancing with another company and they want the letter. How can I make this not look too terrible?

Lenders want assurance that you have a history of paying your debts on time; it's another way of trying to weed out the good credit risks from the not-so-good ones.

In this case, honesty is the best policy. Explain it just as you did to us. If there were unique circumstances for bouncing the check, tell them. If that was the only incident of check- bouncing you've had for a long time, be sure to emphasize that. They're not looking for perfection; they're on the lookout for a pattern of credit problems.