How Can Forbearance Benefit You?
If you own a home and fall behind on your payments you risk foreclosure. The foreclosure spiral begins when your loan payment becomes 16 days overdue. At that point, your mortgage lender will try to contact you to work out a repayment schedule to bring your loan current.
If your first payment becomes 30 days delinquent and the next month’s payment looks doubtful, collection attempts begin in earnest. If your payments fall 90 days behind, the lender will likely refer your mortgage to an attorney or other entity that will initiate formal foreclosure proceedings.
With a foreclosure, the lender takes possession of the house, evicts the tenants, and puts the property up for sale.
A foreclosure on your credit record can be devastating and long lasting. It remains on your credit record for at least seven years. Avoid foreclosure if at all possible.
A way of avoiding a foreclosure is forbearance. Forbearance is a postponement of loan payments for a temporary period of time. This is normally done to give the borrower time to make up for overdue payments. This doesn’t mean the lender has forgiven the debt or any part of it. It simply allows a borrower to pay what is owed at a later date.
Most arrangements call for the borrower to make up the back payments and any fees plus interest over a period of time. When this amount is added to your existing monthly payment the result is often more than can be handled. But it is a better option than defaulting on your loan. A foreclosure can have negative effects on your credit score for years.
Lenders are required by law to work with you and attempt to approve your forbearance agreement request. It is extremely important that you are talking to the correct person within the lender’s organization that handles forbearances.
Additionally you must communicate everything in writing. Take notes on every phone call and confirm them back to the lender in writing. You have time to work this out. Follow through in a timely manner. Even if you get a date to appear in court don’t panic. You are able to get this date extended twice before your home would be sold at an auction.
Forbearance is a good option for a temporary problem. The effect of a successful forbearance on your credit record is minimal to moderate, depending on the circumstances.
If you’re already in foreclosure contact your lender and ask to be referred to the loss mitigation department. A forbearance agreement does not stop foreclosure but causes the lender to “postpone” or “continue” the foreclosure sale until the payments are completely caught up. A borrower MUST comply with the exact terms of the forbearance agreement or the foreclosure sale takes place immediately.
No responses yet
