Mortgage forbearance is a formal arrangement which your bank or lender may agree to if your mortgage payments are delinquent. Even if your mortgage payments are seriously past due, you may be able to avoid foreclosure with a loan forbearance agreement.
No matter how heartless or cold the bank’s staff might seem, there is no bank in the world that wants to foreclose on the family home. This is because banks have no interest in selling real estate – they make their profits by lending you money and then having their money repaid to them with an agreed amount of interest.
When customers default on those responsibilities that the banks rely on to make their profits, then they are left with no alternative but to sell your asset in order to get back the money you promised you would repay.
Unfortunately, we all have moments in our lives where things go wrong. Job lay-offs or illness can cause some major financial problems in many people’s lives. Once your repayments begin falling behind it becomes harder and harder to catch those payments up.
What is a mortgage forbearance agreement?
If you already know you are in financial distress, then it is important you call your lender and discuss your options for mortgage forbearance immediately.
Banks have dedicated staff available who are trained to assist customers just like you to catch up past due payments and hold off the foreclosure process for long enough to allow your account to be put back in order.
Your bank’s loss mitigator will assess your situation and discuss what options you might have available. They will work with you to uncover any options that can help you to actively avoid foreclosure, working towards a mortgage forbearance agreement.
Who qualifies for mortgage forbearance?
In order to qualify for mortgage forbearance you may have to meet a few conditions. If your repayments have been continually missed for ninety days or more, you should receive a letter from your bank very soon – if you have not already. It is important that you respond to this correspondence immediately as your response will instantly freeze any foreclosure proceedings against you and your family home.
During this foreclosure freeze, your lender will work with you to actively bring your account back into line by developing a payment plan designed to catch up with any past due payments. They will take your financial circumstances into account and may even suggest further loan modifications that may help you in other areas.
You should be aware that the mortgage forbearance program is not available for investment properties or homes that are currently vacant.
If your mortgage forbearance agreement is approved then you may be allowed to postpone your monthly repayments for a minimum of four months, although your agreement does not allow your delinquency to be longer than twelve monthly payments.
Loan forbearance is not loan modification
Do not make the mistake of thinking a mortgage forbearance agreement is the same thing as a loan modification. With a loan modification, your lender works with you to either reduce your repayment amount or sometimes even your interest rate in order to help you catch up your past payments, but will not allow you to postpone them.
If you think your financial troubles are temporary, contact your lender as soon as possible as mortgage forbearance could be the answer to avoiding foreclosure.