Three letter hash combinations and single letter hashes would all be essentially plaintext. The security of a hashed password comes from the fact that the password comes from a field of 2^(# of bits) possible values (with more useful bits the more types of "characters" allowed). If you only have a few characters that is so easily crackable (by brute force of every letter or three letter combination) that it might as well be plaintext. It is a security failure if they can get at some of the characters in a password.

However this is a memorable phrase (not password), similar to a security question. These are not generally hashed because customer service uses them to confirm authorization to reset a password.

It would be absolutely trivial to enumerate all possible three-letter combinations and hash them. That's no better than storing in plaintext.