If you're experiencing a temporary hardship that has caused you to be unable to make your monthly mortgage payments, a forbearance agreement is an option to consider that helps you keep your home out of foreclosure until your hardship passes. A forbearance agreement allows you to:
- Reduce or suspend mortgage payments
- Stay in your home
- Avoid foreclosure
- Have time and flexibility to overcome your hardship
The point of a mortgage loan forbearance is to reduce or suspend payments on your home for a period of time until your hardship has passed. Common hardships are loss of income, medical problems, and death of a relative or co-borrower, but can also be something like a natural disaster. The lender agrees not to foreclose during the forbearance period, but when the period is over regular payments must resume, and all of the missed payments have to be made up for. It's kind of like paying the minimum amount due on your credit card. It means less money out of your pocket now, but more later. So you need to be aware of that and have a plan for how you're going make your regular payment plus the amount you weren't paying during forbearance.
If you would like to ask your lender for a forbearance agreement, there are a few things to prepare before you call your lender and ask for assistance. First, you should get all of your financial documents in one place. This should include your recent mortgage statements, statements on any other debt you owe, and proof of your income. Then think about how to describe your hardship to a stranger clearly and in as few words as possible, since this is what you will have to do with your lender. After you've done this homework, then you should call your lender to describe your situation and ask if they have a forbearance program you qualify for.
If your lender is open to reducing or suspending your mortgage payments for a forbearance period, you and your mortgage company will need to come to an agreement on the terms, which include:
- The length of time of the forbearance period
- The amount the payment will be reduced by
- Terms of the repayment
There are several ways to repay the amount you weren't paying during the forbearance period. You may make one lump sum payment, pay some extra money each month, or even have the amount written off through a permanent loan modification.
Remember that forbearance is not forgiveness, and it is not a permanent change. It's a temporary change, and your lender may or may not offer it. Forbearance is agreed to at the lender's discretion, it's not something anyone is entitled to.
Don't wait until you have received a summons and complaint to call your lender and ask for assistance. By then it may be too late to take advantage of the best options. It's best to start planning as soon as you're aware that your ability to pay your mortgage will be compromised for any reason. Letting your lender know about any issues you anticipate in advance won't hurt you. Foreclosure is so stressful that it can be bad for your health, but making proactive decisions puts you in the driver's seat.
Forbearance is a good choice for those who have had a temporary hardship and are not able to refinance. However, the fact that forbearance is temporary limits its benefits. For a permanent change to your mortgage loan, assuming refinancing isn't an option, you should consider a loan modification. A loan modification can give you a lower payment, interest rate, or even reduced principal for the duration of your loan.
While you don't have to have a professional help you apply for a loan modification or other workout option, they can help tremendously. Taking advantage of the knowledge that a professional who's well-versed in the field of loan modification and foreclosure defense possesses can give you the best chance of achieving the outcome that you want. They may know of options that you didn't know existed. Reputable law firms are affordable and well worth their rate.
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