Oct 29

Should You Request Mortgage Forbearance?

Our series continues by exploring the topic of mortgage forbearance and the information homeowners should know when requesting forbearance. Homeowners facing imminent foreclosure can request their lending financial institution to delay the foreclosure, and can catch up with their payments within an agreed upon time frame in order to avoid the foreclosure altogether. The delaying of the foreclosure, to give the homeowner a chance, is called forbearance.

When is Mortgage Forbearance an Option

Forbearance is an option if:

  1. You are facing a temporary financial setback
  2. You have hope (and preferably proof) that in the near future you will be able to catch up with your payments
  3. You have been turned down for, or do not qualify for mortgage refinance.
  4. You have not missed any mortgage payment prior to your financial setback.

If you are finding it increasingly difficult to pay your mortgage due to financial troubles, your initial reaction should be to consider a mortgage refinance. However, if you do not qualify for HARP, and do not fulfill the requirements for traditional mortgage refinance – which include having excellent credit, excellent payment history, and equity in your home – and are facing possible foreclosure, you should request forbearance.

How it Works

Mortgage ForbearanceDepending on the terms and conditions of the forbearance, your monthly mortgage payments are either suspended or significantly decreased in order to give you a chance to get back on your feet. However, forbearance does not mean that the past payments you missed out on have been forgiven; you will eventually have to pay that entire amount in order to avoid foreclosure.

By the end of the forbearance period, you have to pay the total amount of money owed to the lender up until that point. Therefore, forbearance is a viable option to those who are suffering from a sudden decrease or change in income, but would be able to pay in the long run. It provides the much needed temporary financial relief, but does not change the total cost on mortgage.

How to Apply

Different financial institutions have different methods of application. Depending on your lender, an email, a phone call or a letter should initiate the process.

In your letter for forbearance:

  1. Immediately state the reason for writing the letter
  2. Disclose your loan information
  3. Attach documented proof of your financial setback and why you wouldn’t be able to make payments for a given amount of time.
    1. You may also write the reasons behind the financial setback.

IMPORTANT NOTE: It is also a good idea to apply for forbearance before missing any payments. If you miss out on your payments for a few months and then apply, your case would become weak, and in most cases you will be ineligible.

If you are considering forbearance or if you have already missed payments and require foreclosure defense and/or loan modification help, call us today at: 877-882-5338. We also recommend that you follow our Hardship Letter Writing Guide to give you the best chance at pleading your situation to your lender.

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