What is a Mortgage Forbearance Agreement
A mortgage forbearance agreement is an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments.
When Borrowers Have Trouble Paying
A mortgage forbearance agreement is made when a borrower has a difficult time meeting his or her payments. With the agreement, the lender agrees to reduce or even suspend mortgage payments for a certain period of time and agrees not to initiate a foreclosure during the forbearance period. The borrower must resume the full payment at the end of the period, plus pay an additional amount to get current on the missed payments, including principal, interest, taxes, and insurance. The terms of the agreement will vary among lenders and situations.
A mortgage forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems. Borrowers with more fundamental financial problems such as; having chosen an adjustable-rate mortgage on which the interest rate has reset to a level that makes the monthly payments not affordable must usually seek remedies other than a forbearance agreement.
A forbearance agreement may allow a borrower to avoid foreclosure until his or her financial situation gets better. In some cases, the lender may be able to extend the forbearance period if the borrower's hardship is not resolved by the end of the forbearance period to accommodate the situation.
Like forbearance, a deferment allows the borrower to skip mortgage payments for a set period of time. There may be more options with regard to the unpaid interest during this time and it may be added to the loan principal. The unpaid interest may sometimes be waived.
A deferment can often be granted along with another mortgage relief option; so if the lender is modifying the loan to a new payment amount, there may be a short deferment period before the new amount goes into effect.
Usually, a newly established mortgage will include a deferment of the first payment; if you sign a mortgage agreement in April, you might not have to make your first payment until June or August 1st.
Sometimes specific parts of the mortgage may be deferred; interest-only loans defer repayment of the principal potion of the debt for a set time.
Please contact us for further information regarding this option as all banks/servicer's don't offer the same solutions.