Understanding Mortgage Forbearance Agreements
If you fall behind on your mortgage, your lender may offer alternatives to foreclosure that will enable you to stay in your home. The alternatives can include loan modifications, repayment plans, and forbearance agreements which are specifically designed for borrowers who are having difficulty making their mortgage payments due to temporary problems like unemployment, illness, unexpected medical bills, or other types of financial hardship.
Under the terms of a forbearance agreement your lender will reduce or even suspend mortgage payments and agree not to initiate foreclosure proceedings against you for a set period of time. You must agree to bring your loan up to date by paying the delinquent principal, interest, taxes, and insurance that is due by the end of the forbearance period. You will then resume making your full payments.
FHA-insured Loan Forbearance Plans
If you fall behind on a mortgage loan insured by the Federal Housing Administration (FHA), the government requires your lender or servicer to determine if you qualify for one of the loss mitigation programs offered by the FHA. Those programs include formal, informal and “special” forbearance. Any qualified borrower may enter into a formal or informal forbearance plan. Special forbearance is available only to homeowners who are struggling to make their mortgage payments because they recently became unemployed.
Mortgage Forbearance Agreements vs. Loan Modifications
As mentioned above, forbearance agreements are designed to help homeowners who are experiencing short-term, temporary financial difficulties. They are not a long-term solution for delinquent borrowers who have more fundamental financial problems. Those borrowers, including people who have adjustable rate mortgages with an interest rate that has reset to a level that makes their monthly payments unaffordable, must usually seek remedies other than forbearance.
If you are in that category, a loan modification which permanently changes the terms of the mortgage by extending the life of the loan, reducing the interest rate, or removing a portion of the principle may be the right option for you. Unlike a forbearance agreement, a loan modification is a long-term solution that will help resolve your delinquency and save your home from foreclosure.
DebtCleanse Can Help
Whether you are considering forbearance, a loan modification, or other type of repayment plan, you should always contact an experienced foreclosure attorney before entering into any agreement with a mortgage lender or servicer. DebtCleanse’s network of skilled attorneys will guide you through the process, make sure you understand what your lender is offering, and help ensure that that the choice you make is right for you, your family, and your financial future. Get started today!