Mortgage Forbearance Programs
The word “forbearance” means to “hold back” and in the case of mortgage forbearance programs the lender agrees to hold back on exercising its foreclosure rights to give you a brief reprieve from payments in an overall plan to bring your mortgage current.
Skipping a few payments might sound good but forbearance is a temporary foreclosure solution at best with potentially severe consequences for default and is therefore not for everyone. Because of this mortgage forbearance is typically limited to homeowners experiencing short term and unexpected financial problems with a clear end in sight like temporary unemployment or mandatory unpaid leave, illness or other emergency. Learn More About Other Foreclosure Options
With mortgage forbearance as a foreclosure option you and your lender agree to temporarily reduce or suspend your mortgage payments for a brief period of time generally between 90-180 days before resuming regular monthly payments. The obvious benefits of mortgage forbearance includes reducing or suspending payments to give your finances a chance to improve, less damage to your credit than foreclosure and it lets you stay in your home and hopefully avoid foreclosure altogether. More on the Foreclosure Process
Despite these advantages, mortgage forbearance does not mean forgiveness and at the end of the forbearance period you’ll be required to repay in full all of the principal, interest, taxes and insurance that were skipped or reduced. Depending on the terms of your forbearance agreement you can repay the missed payments in one of three ways – moving the payments to the end of your loan thus extending the loan term, a one-time repayment or adding the total forbearance amount to your regular monthly payments until completely repaid.
In addition to the pressure of increased payments once the mortgage forbearance period ends, the lender typically makes it easier to foreclose if you default on your forbearance agreement. If you can’t resume monthly payments or afford the increased payments as a result of the forbearance, the bank will be in a much stronger position to take your home. Foreclosure Lawsuits
As a result of these factors and the number and quality of other foreclosure options that may be available to you, mortgage forbearance is probably not the best option for most homeowners.